From PitchBook, December 9:
Growing data consumption and global desire to lower greenhouse gas
emissions are strong tailwinds for private infrastructure
investors—particularly KKR, the firm's co-CEO Joe Bae said.
"The macro investment opportunity in infrastructure is incredible," Bae said on Dec. 6 at Goldman Sachs' investor conference in New York.
More private capital will pour into infrastructure, Bae said, as institutional and retail investors look for stable returns and hedges against inflation. Healthy and growing private fundraising will fill in for insufficient infrastructure funding by governments, he predicted.
Bae's comments hint at KKR's intentions for deploying its tens of billions of dollars of dry powder devoted to infrastructure investments. The KKR Global Infrastructure Investors IV fund—which focuses on assets and companies in member countries of the Organisation for Economic Co-operation and Development—amassed nearly $17 billion in commitments before closing in March, making it the largest US-based infrastructure fund to close in 2022, according to PitchBook data.
By far the largest use of those funds so far was KKR and Global Infrastructure Partners' $15 billion take-private of CyrusOne, a Dallas-based company that owns and operates data centers. That deal closed in August, and Bae's comments signaled that the firm would make similar investments.
"Think about digital infrastructure around the world—all the data consumption that's happening. It's fiber. It's towers. It's data centers," Bae said. "That's still going to be a massive area of deployment and need for the world as technology continues to advance."
The firm's exposure to infrastructure—often considered a separate strategy from private equity—has exploded in recent years. From April 2021 to September 2022, KKR's infrastructure AUM grew from $17 billion to $50 billion, Bae said.
As for energy-related infrastructure, Bae referenced the "trillions and trillions" of spending needed to decarbonize Earth in the coming decades. (The International Energy Agency found that for the planet to reach net-zero greenhouse gas emissions by 2050, global spending on replacing and building the required infrastructure would need to top $4 trillion annually by 2030.) As many governments face constrained budgets post-COVID-19-stimulus, they won't be able to afford to build that critical infrastructure, Bae said....
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Re: data centers, on the other hand, Jim Chanos is short data center REITS Digital Realty Trust (DLR, blue line) and Equinix (EQIX, Black OHLC) vs S&P 500 (gold line):
