A staggering amount of liquidity is waiting to be invested, Digital Bridge Holdings co-founder and CEO Mark Ganzi told an audience during his Investment Insights session at the Connectivity Expo in Orlando, Florida, last week. But the origins of that capital have shifted over the years, he said. According to Ganzi, private investors are now raising massive amounts of capital as infrastructure funds
“Ten years ago at this conference you would have seen 20 private equity firms … chasing management teams,” Ganzi said. “Today, none of those folks is here. This is not the pond where they want to fish, and now you have infrastructure funds doing the underwriting.”
Infrastructure funds raise capital to take advantage of opportunity to invest in rebuilding the nation’s infrastructure – including bridges, airports, seaports and mid-stream energy, as well as digital communications infrastructure, Ganzi said. He said that pension funds, insurance companies and sovereign wealth funds have diversified their asset allocations to include infrastructure funds, which offer returns of 9 to 12 percent.
“A lot of money is rotating into our sector, but it is not always in ways that you can see, because John Hancock doesn’t send out a press release when it rotates more funds into infrastructure,” Ganzi said.
Where that money is being spent is shifting from mergers and acquisitions to building greenfield assets, Ganzi said, because the economics favor the latter. He said that in 2018, the infrastructure spend in Europe, North America and Latin America was $144 billion, including $39 billion in mergers and acquisitions and $104 billion in greenfield investment. It is at least 1.2 to 3 times more expensive to buy an asset versus building it, Ganzi said. Digital Bridge’s portfolio companies, themselves, have shifted to investing greenfield.
“Every one of our portfolio companies is building something today — a new DAS network; a new hyperscale data center in Ashburn, Virginia; a new build-to-suit in the suburbs of Helsinki; an indoor DAS for an English Premier Soccer League team,” Ganzi said. “This is where we are putting our capital to work.”