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00:00It's fascinating to sit here with these three global investors who really in many ways have
00:07helped invent this asset class. The hundreds of billions of dollars, the trillions they have
00:13among them are some of the most influential dollars around the world and at a time where
00:18infrastructure is a critical piece of the capital markets. Shamar, I want to start with you
00:26on that exact note which is this is an asset class in a way that it wasn't when all of you guys got
00:33into business a couple decades ago doing this. Yeah definitely and I'm glad to see you paying
00:38attention to what Bayo told you of asking Bruce the first question. But yeah I mean you know we're
00:46going back I guess about three and a half decades when infrastructure evolved as an asset class and
00:52it started really in Australia back in the day where a state government had got into financial
00:57difficulty and to pay off debt privatised a lot of utility type assets and we just had compulsory
01:03pensions come in in Australia and I guess partly we were looking for a client but also it made sense
01:09to us that the most logical owner of these long duration capital protected yielding style assets
01:16were the savings of the retirees and so we put together funds together with others in Australia
01:23to buy these assets and then we had to build operating expertise to manage the assets and
01:28gradually it's grown now into a lot of other regions into a lot of other sectors from utilities
01:33into transport into communications digital infrastructure is a big thing today but I still think we're you know
01:39even though the three of us we were saying have probably been in this for three and a half decades and
01:44were there before anyone else it's growing into a bigger asset class now where there are a lot of
01:49variety of providers which is great for communities and investors despite that I think it's still very
01:55early stage and I'll let the others is that a fair do you agree bio it's fairly early stage in terms of the
02:01opportunity for infrastructure investment oh absolutely first I have to give credit to Shamara
02:06Macquarie actually invented infrastructure as an asset class so thank you for doing that but when we started at
02:13we started at the beginning of energy I tell you what 20 years ago I think there was 50 billion that was managed by
02:17infrastructure managers today it's about over a trillion dollars but I still think we are at the
02:22beginning of the gold age of infrastructure private capital infrastructure think about all the big macro trends
02:28digitization energy transition energy security infrastructure renewal these are all going to require very large amounts of capital at a time where public
02:31sources are constrained so the only realistic alternative is private capital and every government you know every government you meet with is talking about how do we stimulate growth and investment in infrastructure is clearly an area where you can do that right and so Bruce pick up on exactly that and
02:49you know you know the digitalization piece especially Ruth Port was on stage you know talking about the AI opportunity and what that's going to take from an infrastructure perspective tell me how you're essentially answering that call and how massive that call is so
03:06the the first thing I'd say is and what's really important is 50% of the things that we invest into today in a trillion two of stuff didn't exist as an investment asset class 20 years ago 50% what that means is the whole backbone of the economy it's the same but it changed
03:36all the time it changes all the time and the Ruth referred to earlier the AI build out and she said it's about power but I don't think what she didn't say is that the real problem we have is that we can't build the power fast enough you need to find the land you need to connect it to the grid you need to build the build the power you need to build the data centers you build you need to put the computer inside and this is an enormous enormous effort
04:05to build the backbone out for artificial intelligence like we were surviving with building for cloud and for regular power but everything is electrifying in the world generally and second artificial intelligence is only we're not even in the first inning and therefore the build out for that the big impediment is not chips
04:35and what we're not even in the first inning and what we're talking about is $5 to $10 trillion like these are sums that have
04:41have never
04:43been invested
04:45before
04:46right
04:46like this is the railways the roadways that we built out in the decade in the
04:5250 years ago
04:5350 and 100 years ago and that's really what's going on but it's going to arm
04:57business
04:59and and it's it's led by the u.s today
05:01but it's going global in every single country because it's going to be table stakes for business
05:07in the world
05:08like that's what we're going to have to just underline
05:11the backbone of what's going on in the world today and and that's that that's the real challenge for us
05:16and so shamara how difficult is it to meet that challenge i mean are you able to
05:19sort of amass the the capital that you need to to get there and and where does that capital come from
05:26yeah well i mean i think byron bruce were talking about on the asset side
05:31amount of capital being needed so big opportunities for investment but equally
05:35um on the investor side there are massive pools of savings in the world that are still
05:41under allocated to this asset class okay and i'm not just talking about institutional money
05:46you know we've got a few hundred trillion of money out there that has very low exposure to this asset
05:52class which logically fits with a lot of the liability profile of the people who are managing
05:57these pools and it's not just the institutional money but um you know in the u.s here more than
06:04half the wealth is in private capital through um either private wealth or 401ks they're talking about
06:11giving access to more of these uh asset classes the private markets illiquid asset classes and as i said
06:17at the beginning it fits well with these liability profiles um countries like canada and australia some
06:23of the pension funds have 15 allocations to infrastructure here it's one or two percent
06:29so i think both for the communities that need the capital and not just the evolving needs bruce just
06:34talked about but even conventional infrastructure here in the us a lot of the roads and utilities are
06:39owned at local and state government airports as well and um there's scope when they have all this debt
06:46to bring private capital to invest in that from the community point of view but also from the
06:50investors point of view i think it's an asset class where it makes sense for the holders of those um
06:57pools of capital to allocate more so that's why i think it's a great thing that so many other
07:01managers are coming into the asset space there is diversification and the scale is going to grow on
07:06both sides and so payo how would you describe the investor appetite side and where is it coming from
07:12sort of by category is it is it the sovereigns is it the pensions is it the endowments is it all of
07:17the above look it's all of the above i mean you think about it what is there not to like about an asset
07:22class that gives you steady yield is uncorrelated to other asset classes gives you capital appreciation
07:31gives you inflation protection if anybody here manages money you're not in infrastructure you're
07:37you're doing something wrong okay and because look it is very attractive asset class okay and the need
07:44is there uh there's something called the american society of civil engineers every two years they
07:49publish an infrastructure report card for the u.s i encourage you to go look at it if your child
07:57showed up at home with a report card that looked like that you take away their ipad their iphone you'd stop
08:02them from watching television i think the highest grade was a b minus everything else is a c plus or a
08:07d right so you know there's talk about digitization there's talk about energy transition but even
08:15refurbishment of basic infrastructure in the u.s in europe uh in other countries creates a tremendous
08:21amount of demand so you talk to most institutions they'll either tell you that infrastructure is the
08:26number one asset class i think they are you see the infrastructure or private credit those are the top two
08:31and so i think the demand is there and the key is creating investable opportunities for for for
08:38for the asset class and so to that end bruce what are the most investable opportunities because you
08:43you know that there is a limited amount of like time and money and space that you have to do this so
08:49if you had to pick one or two areas of the world or types of projects you're most excited about what
08:53would they be so every single in every single country of the world not power i'm generalizing
09:01power has been flat for 20 years power usage uh so there were improvements in power power was getting
09:08building built but the usage was basically flat for 20 years the next in 15 years from now every single
09:14grid in the world is going to double double it was flat for 20 years so the opportunities in building
09:22power are endless and if you know how to do it the opportunities are very significant that's number
09:29one number two is uh i'll call it data centers but really computation computational intelligence
09:37building compute capacity for hyperscalers governments because the use of uh governments using
09:44sovereign ai and hyperscale is needing it for computational capacity to feed small medium and large size
09:51business is uh almost endless and i i say endless we the point is we can't uh everyone's interested in it to
10:01bios points he made five points and everyone was 100 true everyone's interested in it the real thing is
10:07who is skilled enough to be able to build it and that's that's actually the real thing like we've we've
10:14been in this a long time everyone when there's a sector like this and it's all the traits that he just
10:19mentioned and lots of money and lots of opportunity and it's the sexiest thing in the world to do
10:24everyone's interested in it right the question is can you do it right and that's the the difference is going to be here is
10:31those that are skilled in building things and doing this type of activity and the the the mistakes will be made here
10:40right people that don't really know what they're doing and so bio how do you ensure that you have the right you've been doing this for a long time and you've done
10:47every infrastructure every type of infrastructure project under the sun but they don't all call for the same
10:55skills of people the same managers how do you find those people and how drastically has that changed as
11:00you evolved what you're trying to do yeah look i i think one of the keys that people sometimes on the
11:07look uh don't pay attention to is it's actually how you manage these assets right think about most infrastructure
11:13assets they tend to be monopolies right i mean nobody's ever going to build another airport in new
11:17york okay nobody there may be a third runway at heathrow we just got approval from the uk government to
11:23build a second runway at gapway but they're monopolies and what are monopolies they tend to be lazy and not
11:29particularly well managed and so one of the things that we focused on is how do you get infrastructure
11:35businesses to think about customer service we had we had an infrastructure company well do you know
11:40what they call their customers they didn't call them customers they didn't call them clients they didn't
11:46even call them accounts they called them debtors when you call your customer debt are you really going to
11:51focus on customer service right so you change that mentality people often ask me um aren't you worried about
11:59the fact that you're on airports and you know these are strategic assets and governments will come in
12:03and interfere i said no the thing you have to focus on is you provide quality service at affordable
12:10prices people will live here alone provide lousy service at bad prices of course the government will
12:15interrupt right so i think focusing on how to manage these companies and provide good customer service
12:20be efficient in how you're on operations have capital discipline i think that makes a huge difference
12:25in success shemar one thing i want to make sure we talk about is you know geopolitically the world is
12:33quite turbulent i i think it's fair to say in polite company um energy security is is a huge
12:41issue concern for a lot of people how does that figure into both your investment thesis but maybe to
12:48bio's point how you manage assets and look i think there's a spectrum of managers in this asset class
12:54like all of them like bruce has been in real estate for ages there are core core plus opportunistic
12:59value add um i think all three of us are very active managers of infrastructure so we come in early
13:04stage and we try and offer the beta plus a meaningful amount of alpha through active management but um
13:10there are also themes playing out we specialize in certain themes i think what is happening uh i heard
13:16david lammy talk about globalization i think what's happening at the moment is a level of de-globalization is
13:21being driven where um lots of other regions are waking up to the fact that they need to be self
13:26reliant from energy security defense a whole bunch of things supply chains are moving in terms of trade
13:32that creates real opportunity for infrastructure investors like us it's challenge but also opportunity
13:38and i think energy security is definitely one of those areas where there's a lot of opportunity to
13:43invest i think europe feels very exposed because of the exposure to russia and sources of fuel from
13:49there so they're looking to build security um the asian continent is growing a lot in energy demand
13:56and needs to have security so it's one of the many themes in which we're investing and we focus a lot
14:02on deep deep expertise um also new forms of energy are needed because solar and wind which have grown
14:08to scale are very intermittent and we need firming baseload solutions so we've just raised a three bill
14:14energy transition fund where we're focusing a lot on things like battery storage but we hire people
14:19with deep expertise in each of these multiple sub-sectors to deliver alpha all right we only have about
14:25a minute left so bio and bruce i'm going to give you you two the the last couple words what are the things
14:31that could get in the way of this very fast growing asset class at this moment look the big the biggest
14:38obstacle is is regulation right you know it shouldn't take 10 years to get permission to build a
14:45transmission line in in in the u.s or in europe okay and i think one of the things that the administration
14:50is doing right we're hearing the right noises from the european commission although we haven't seen a lot
14:56of action but we're hearing the right noises is streamlining the process for for getting these things
15:02um built and if that doesn't change uh you know the challenge that bruce um identified which is
15:09how are we going to build all this power generation how are we going to upgrade the transmission system
15:14that's going to support the construction of data centers which mostly are for actually cloud
15:20migrations today it's not really a lot most of it is actually for unsufficient intelligence i i think
15:25that's the biggest obstacle regulation bruce last word to you look i i think um i i think this asset
15:31class it's from 20 years ago is zero in institutional accounts today it's 15 uh it's going to go to 30
15:38and retail wealth accounts individuals it's zero and it's going to go to 20 or more uh this
15:45is god we've got 25 years runway of an enormous build out and it's purely because these are uh excellent
15:54assets to own in long-tailed accounts that uh have downside protection and earn and earn reasonable returns
16:01and the the success of wealth building is compound uh uh reasonable return over very long periods of
16:09of time and that's what infrastructure can do for you
16:18you
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