⚙️ Infrastructure is Becoming Private Equity

Welcome to this week's Capital Call - your Wednesday dose of private market insights without the jargon. At OneFund, understanding market shifts is crucial for making informed investment decisions.

Pour yourself something nice and dive in. 

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📈 MARKET MOVERS

• 📊 Global M&A Hits $4.8 Trillion as Mega-Deals Return

  Private equity buyouts surged 51% to $1.1 trillion in 2025, with 70 deals exceeding $10 billion globally. The "race for scale" is driving activity, with dealmakers citing several $50-70 billion transactions already positioned for 2026. Cross-border deals jumped 46% as companies exploit looser antitrust scrutiny under the Trump administration.
  See the numbers →
  

• 🏢 Ares Eyes $100B+ PE Acquisition to Compete with Mega-Firms

  Ares Management CEO signaled the firm could acquire a PE platform managing $100 billion or more to scale its buyout capabilities and compete directly with Blackstone, KKR, and Apollo. Private equity currently represents just 4% of Ares' $600 billion AUM, down from 13% in 2014. The move reflects industry consolidation as scale becomes critical for accessing institutional capital.
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• 💰 Emerging Markets Draw $50B Inflows as Diversification Accelerates

  For the first time since 2017, emerging market stocks are outperforming US peers, with allocators rotating capital away from concentrated US large-cap growth exposure. JPMorgan projects up to $50 billion of inflows into emerging debt funds in 2026. The shift reflects portfolio rebalancing after years of EM underperformance, with investors drawn by improving fundamentals and yield compression.
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🔍 DEEP DIVE

The $7 Trillion Infrastructure Buildout Creating PE's Next Decade

Hyperscaler capex is jumping from $270 billion in 2024 toward a projected $1 trillion by 2030. The infrastructure can't wait. Over the past 18 months, utilities in Texas and Virginia have started rejecting new data center applications outright, not because of policy, but because the grid physically cannot handle more load. Amazon, Google, Microsoft and Meta can't build it alone. The capital requirements are too large, the timelines too long, and the operational complexity too high. PE firms are filling that gap as infrastructure partners with patient capital and operating expertise.

Why Hyperscalers Need PE Capital

Building a single hyperscale data center requires $10 million per megawatt for the facility, plus $30 million per megawatt for compute infrastructure. Multiply that across thousands of facilities globally, and capital requirements dwarf what venture capital or corporate balance sheets can handle.

A common misread is that hyperscalers are self-funding. Amazon, Google, Microsoft, and Meta account for 90% of global clean energy contracting for data centers. But they're not writing all the checks themselves. They're partnering with PE firms that bring three things tech companies don't have: permanent capital structures matching 15-20 year asset lives, operational expertise in running complex physical infrastructure, and relationships with utilities and governments to secure power access and regulatory approvals.

The partnership model is straightforward. A hyperscaler commits to a long-term contract (often 10-15 years) for power or data center capacity. A PE firm provides the capital and operational platform to build and run the asset. The economics work for both sides: the tech company secures critical infrastructure without balance sheet strain, and the PE firm locks in contracted cash flows from creditworthy counterparties.

This is where infrastructure logic starts to overpower traditional PE thinking.

The tradeoff is liquidity. These deals lock up capital for 15-20 years with limited exit optionality. That's a feature for patient capital, but a constraint for funds with shorter return horizons.

Most LPs still think of infrastructure as boring utilities and toll roads. They're missing the point. The highest-returning infrastructure deals today look like PE deals with infrastructure contracts attached. That distinction matters.

The firms deploying capital now are locking in 10-15 year contracted cash flows at attractive spreads. Those sitting on the sidelines are watching the best opportunities get picked off.

The Power Problem No One Planned For

AI workloads consume up to 10 times more power per rack than conventional compute. And that's just today's chips. As rack density increases with next-generation processors, power requirements could jump another 5-10x in some deployments.

Three years ago, no utility was planning for this. Over 70% of global transmission lines are more than 25 years old, and interconnection queues stretch close to a decade. You can't plug in more data centers when the grid is maxed out.

PE infrastructure funds are deploying capital across three solutions: behind-the-meter generation (power plants at data center sites to bypass grid bottlenecks), grid modernization projects, and baseload generation combining gas, nuclear, and renewables. These aren't speculative bets. They're infrastructure investments with long-term, inflation-linked contracts backed by investment-grade counterparties.

The execution risks are real. Permitting timelines for power projects can stretch 3-5 years, exposing capital to regulatory uncertainty. Nuclear projects carry political risk, where government support shifts with administrations. And hyperscalers have repriced power contracts when projects miss delivery milestones. Patient capital helps, but doesn't eliminate construction and regulatory exposure.

The U.S. government announced $80 billion for nuclear reactor construction, starting 10 new reactors by 2030. That's infrastructure policy driven by power demands only PE-scale capital can meet.

Manufacturing Returns Home

U.S. construction spending on manufacturing facilities hit $232 billion in 2024, up 42% annually since 2021. Intel's Ohio fab: $20 billion, 3,000 construction workers, 5-year build. No VC fund can write that check. No corporate balance sheet wants that risk.

And that's just one fab. TSMC is planning $40 billion in Arizona. Samsung another $17 billion in Texas. The capital requirements are absurd.

The scale favors PE firms that think in infrastructure terms: decade-long holds, government partnerships, operational complexity as core competencies.

Semiconductor fabs, battery manufacturing, advanced robotics. These opportunities are getting structured as infrastructure partnerships before they hit traditional PE fund pipelines.

What This Means for Allocations

The $7 trillion buildout shifts the PE toolkit. This favors managers with operating platforms, government relationships, and permanent capital structures matching 15-20 year asset lives. Firms like Brookfield, Apollo, Cerberus, KKR, and Blackstone are raising dedicated infrastructure-linked vehicles.

For LPs, this changes portfolio risk-return composition. Middle-market LBOs deliver different characteristics than infrastructure-linked PE: shorter holds, less contracted cash flow, higher operational leverage. Neither is superior, but the infrastructure portion requires different manager capabilities and different due diligence.

🧰 TACTICAL TAKEAWAYS

• Manager capability mapping matters more than brand recognition Map which managers can underwrite projects with 15-20 year asset lives and non-linear capex schedules. The capability gap between traditional PE and infrastructure-scale deployment is meaningful. If your current managers can't execute these deals, your portfolio won't capture returns from this structural shift.

• Operating platforms signal execution capacity Evaluate whether managers have in-house operating capabilities across power, construction, and industrial operations, or rely on external consultants. The former suggests execution capacity; the latter indicates platform limitations. Co-investment decisions in this space require assessing operational depth, not just capital availability.

• Hold period extension changes portfolio dynamics Infrastructure-linked PE investments hold 10-15 years vs. traditional 5-7 year exits. The tradeoff: contracted cash flows and inflation protection in exchange for reduced liquidity and longer J-curve. This fits portfolios seeking steady compounding; it doesn't fit portfolios needing near-term DPI.

• Co-investment evaluation requires infrastructure underwriting skills Evaluate co-invests as contracted infrastructure assets first, operating businesses second. The due diligence questions shift from market positioning and competitive moats to contract terms, counterparty creditworthiness, and construction completion risk. If your team lacks infrastructure underwriting experience, the learning curve is steep.

🧵 WEEKEND READS

(Because some light market analysis pairs wonderfully with Saturday coffee)

• 💶 European Banks Quietly Become PE's Preferred Exit Route European banks completed over $15 billion in acquisitions of PE-backed financial services firms in 2025, the highest annual total on record. Unlike bank mergers that trigger political backlash, buying from private equity offers surgical growth without controversy. For PE funds facing cold IPO markets, well-capitalized banks provide clean exits.
  Dive into the trend →

• 💳 Private Credit's 2025: From Niche Strategy to Mainstream Allocation

  Private credit continues structural expansion as institutions treat direct lending as core fixed income. Infrastructure debt showed 0.5% defaults versus 2.4% for corporate loans. Behind-the-meter power financing emerged as significant deployment channel, combining infrastructure contracts with private credit structures.
  Read the full picture →

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The OneFund Team

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