The Infrastructure Awakening

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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🧠 THE BIG IDEA

The Infrastructure Awakening: Why the World's Largest Asset Class Just Became Private Equity's Next Frontier

Limited partners are quietly shifting their allocation preferences. Infrastructure has become the asset class that more institutional investors want to increase than any other, according to recent industry surveys.

The shift reflects practical considerations. AI requires more power infrastructure, climate policies are driving energy system rebuilds, and trade growth needs logistics capacity. Private equity firms are taking notice as these trends create investment opportunities that traditional buyout strategies don't capture.

For private market allocators, the question isn't whether infrastructure makes sense anymore—it's whether they understand how the sector has evolved from regulated utilities into something closer to growth investing.

📈 MARKET MOVERS

💼 PE Healthcare Investment Accelerates: Private equity's physician employment share reached 6.5% in 2024, up from 4.5% previously, as healthcare consolidation continues. With potential policy changes creating market dynamics, PE firms are identifying opportunities in medical practice management and operational efficiency improvements. Read the analysis

💸 NYC Pension Systems Execute Landmark $5B Secondary Sale: New York City's pension systems completed potentially the largest secondary sale to date, with Blackstone acquiring interests in over 125 funds managed by 74 firms. This reflects growing institutional pressure for liquidity amid distribution challenges. View the details

🏦 Seaside Equity Closes $720M Across Two New Funds: San Diego-based Seaside Equity Partners closed its third buyout fund at over $565 million, surpassing its $550 million target. The firm's Navigator I fund targeting smaller companies neared a $155 million close, demonstrating continued appetite for middle-market strategies. See the funding

📊 Accounting Sector Sees Regulatory Evolution: State accounting boards are working with PE-backed firms to clarify CPA credential usage in evolving business structures. The regulatory guidance aims to maintain professional standards while accommodating innovative dual-entity models that separate audit and advisory functions. View the details

🌐 Trade Environment Shapes Deployment Strategies: Wharton research shows three-quarters of GPs are adapting to trade policy impacts on deployment timelines. While uncertainty creates near-term caution, experienced managers are using market volatility to identify attractive entry points and strengthen portfolio company operations. See the research

🔍 DEEP DIVE

How Infrastructure Became Private Markets' Most Wanted Asset Class

The numbers show a clear shift in LP preferences. Industry surveys reveal infrastructure has become the top choice for allocation increases among institutional investors, which reflects how the sector has changed over the past few years.

Boston Consulting Group's Infrastructure Strategy report shows private infrastructure assets reached $1.3 trillion as of June 2024, up from around $300 billion a decade ago. The growth comes as AI creates new power demand. BlackRock's AI Infrastructure Partnership notes that developing AI technology needs investment in data centers and power generation, which is driving the first sustained uptick in power demand since the financial crisis.

The opportunity goes beyond digital infrastructure. EY's institutional investor analysis highlights growing institutional interest driven by trade growth and climate policies. Research shows that clean energy and enabling infrastructure could need trillions in annual investment by 2050. Infrastructure managers are adapting by moving beyond traditional yield-focused strategies toward operational value creation, borrowing techniques from private equity.

For PE firms, infrastructure offers advantages that traditional buyouts don't. Unlike buyouts, which face increasing competition and compressed multiples, infrastructure benefits from supply-demand imbalances that create pricing power. The sector has evolved from regulated utilities into something that resembles growth investing, offering returns that don't depend on financial engineering.

🧰 TACTICAL TAKEAWAYS

• Review infrastructure allocation targets as LPs favor the asset class over traditional PE strategies. Focus on managers with digital infrastructure and energy transition expertise.

• Assess infrastructure managers' AI capabilities during due diligence. Look for firms that understand data center development and power demand trends.

• Consider geographic diversification beyond developed markets. Growth opportunities exist in emerging markets with infrastructure gaps.

🗳️ COMMUNITY POLL

🧵 WEEKEND READS

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

• 🌍 European Private Equity Group EQT Says Now Is the Moment to Buy Into US - "Everybody is now running away from the US. And that might be a good time for us to do more," says EQT's founder, as pension funds cool on US investments until policy environment stabilizes.

• 💼 Man Group Sees Market Stabilization Signals - The asset manager's macro regime model identifies current conditions as similar to recovery periods in 2010 and 2020, suggesting potential opportunities ahead despite continued uncertainty in M&A markets.

  🏛️ London Banks Eye PE Exits for IPO Revival - City analysts expect major private equity exits to drive London's public market recovery, with firms like KKR and Blackstone holding key assets that could anchor the next wave of significant listings.

  🔄 NYC Pension Completes Record $5B Secondary Sale - New York City's pension systems streamlined their private equity relationships through what may be the largest secondaries transaction ever, selling stakes in 125 funds to focus on 45 preferred managers.

👋 WANT IN?

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The OneFund Team

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