Why APAC investors should invest in North America infrastructure

Why should APAC investors consider investing in North America infrastructure in today’s climate?

Michael: First, there is a need for trillions of dollars in infrastructure investment in the US alone, and the government has been providing attractive tax incentives in certain sectors to encourage this. Second, rising interest rates have impeded transaction activity in the past 24 months, which we fully expect will pick up as interest rates decline. Third, APAC investors generally haven’t focused on mid-market North America infrastructure, so it provides portfolio diversification for sophisticated institutional investors seeking global exposure in OECD regions.

John: North America is also a vibrant market with great assets. At Igneo, we focus on energy transition, transportation and logistics, digital and connectivity, as well as the water and waste sectors. In recent years, there has been more activity in energy transition due to the drive to decarbonize the economy, and in the digital space given the rise of AI and demand for data-center capacity. These two themes converge, since the growth of data centers is putting pressure on the power grid.

How do North America infrastructure strategies deliver risk-adjusted returns for APAC investors?

Michael: We focus on middle-market infrastructure, where competition isn’t as significant. The number and value of deals relative to the volume of capital seeking to invest in this segment of the market is at a less competitive level, enabling us to be highly selective. Compared to middle-market private equity, where there are hundreds of GPs and private investors across a variety of industries, there are far fewer experienced infrastructure managers.

John: Additionally, North America is a very entrepreneurial market, so there are good infrastructure businesses that may be founder- or private family-owned, where we see levers to improve value. Igneo is an active manager, so we seek control-orientated positions to improve businesses and drive value creation.

Michael: For example, 18 months ago, we invested in founder-owned network solutions provider, US Signal. The founder was retiring, so we brought in a new CEO who leveraged the strong existing culture and positioned US Signal for growth, taking advantage of the incredible tailwinds in the data center space. We set a five-year strategy, communicated it clearly throughout the company, and put capital behind these initiatives. It’s one of our four current investments in North America.

Are there any challenges involved in this market and asset class for overseas investors?

John: The North America market, while massive, is highly fragmented and diverse. Regulations and local laws can vary from state to state. But this also means there is a broad set of opportunities. Understanding local dynamics is important, which we believe we can do given our experience and broad network in North America, building on our firm’s 30-year global track record.

About
John Ma is a Partner and Co-Head of Igneo Infrastructure Partners team in North America. John is currently a board director at Patriot Rail and Terra-Gen. Prior to joining the team in 2018, John held a senior role at the Port Authority of New York & New Jersey, which operates the bi-state region’s airports, ports, bridges and tunnels, and PATH commuter rail.

Michael Ryder is a Partner and Co-Head of Igneo Infrastructure Partners team in North America. Michael is currently a board director at US Signal and Soltage. Prior to joining the team in 2022, Michael was a Senior Managing Director and Head of Americas at OMERS Infrastructure and was a senior member of its executive management committee.

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_{This article originally appeared in APAC Q3 2024: Preqin Quarterly Update. The opinions and facts included in the above do not constitute investment advice. Professional advice should be sought before making any investment or other decisions. Preqin and Igneo Infrastructure Partners accept no liability for any decisions taken in relation to the above.}