Title says it all - I've done some research into Infra PE and saw decent representation from both types of teams (although slightly more project finance). Interested in hearing some other perspectives as well - what are the relative skills offered in each type of group generally, and how are their respective Infra PE recruiting prospects/processes? Thanks!
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I’m in project finance, and it depends heavily on the bank. Some project finance teams just underwrite syndicated loans all day (eg Japanese banks) while others (eg BBs) are active in advisory, origination, and execution. Have seen a lot of moves from latter teams, but its very difficult from the former, even if they might be higher on the league tables. I’m at a BB and we’ve had quite a few analysts move into Infra PE.
Either way to me it seems P&U is a safer bet, just because half of the recruiters don’t understand what project finance does. What sorts of funds have you seen with heavy PF representation?
Thanks for the info! Mostly in the 1-3bn AUM range is where I've seen more PF representation, with more P&U at the larger funds. I've definitely by no means looked at every fund so far, so it could be that the ones I did look at leaned that way.
While I have your ear, does each fund's strategy tend to attract different backgrounds? For example, would a PPP focused fund find more value in a PF background vs would a non-core investor that buys out assets prefer P&U for the M&A exposure?
Caveat here is I just started as a first year analyst, so I’m not yet 100% sure on everything. Happy to come back to this thread in a few months when I’ve talked with more recruiters etc.
Generally, I believe PF backgrounds are more common at core/core+/infra debt type funds. However, I’ve heard of BB PF analysts making the jump to opportunistic, and even distressed as well. Are you in the UK or US? Big differences between the two as well from what I know.
So SMBC and MUFG's reps don't really transfer? Do you know what exists are typical from those shops?
Unsure, sorry.
It's not even close. IB P&U team will get you about 100x more looks vs. the project finance team. Experience will be much more well rounded as well. The project finance teams that I've seen all sit within capital markets and from the HH perspective get lumped into capital markets as well (i.e. experience discounted substantially). The PF models themselves are extremely technical, and I think the practical experience of that group is pretty strong, but definitely wouldn't recommend it for exits.
Yeah I’m the poster above and I would agree. Our experience is good but I think funds (and especially recruiters) view it as too niche - it’s an uphill battle convincing them otherwise. From what I’ve heard good PF analysts in good teams can get any Infra PE interview, but when push comes to shove, P&U is definitely more well-rounded.
Honestly the modeling experience in PF is fantastic though. If you're interested in working for an infra fund, do 2 years in the PF group and then move to the IB P/U group as. a 3rd year (they'll likely be happy to take you given the relevance of the experience). I think the combination of PF modeling + P/U exposure would actually make you an extremely strong candidate for infra funds (better than either individually).
What are some of the best P&U groups? Barclays and MS come to mind for me
Yep. GS is strong as well, lower volume but good deal size. Citi quite good and the opposite (smaller low fee deals but higher deal volume). Lazard used to be quite strong as well on the M&A side, not sure how they are doing in the last 2-3 years. BAML, JPM and CS are all pretty average, UBS quite poor and DB almost non existent in the sector
Apart from Lazard the other EBs have tried to play in the sector but hardly made a dent. CVP and Evercore have both poached relatively senior coverage guys from BBs but don’t think they have done much at all
Check out this thread: thttps://www.wallstreetoasis.com/forums/ama-infrastructure-pe-ibd#new
Seems like Macquarie, Evercore and RBC are well respected.
That may be in transport / other infra like telecom etc, definitely not power, utilities, renewables.
P&U over project finance any day.
Have worked in energy finance/infra PE for 10+ yrs.
What’s the recruiting process like for P&U IB corporate side Coverage at a BB vs. Project/Infra/Transportation Finance at maybe an bank like SMBC/Mizuho? Do they expect you to know project finance technicals for summer analyst level in NY? It’s a bit hard to find the right answer to these questions online bc of different structures at banks.
Do those banks have separate recruiting processes for P&U / PF? In my experience you go through placement after you get your general IB / CM offer, and then you have the option of networking with the team you're interested in.
They don't expect you to know much in terms of technicals. Just demonstrate that you have an interest and firm understanding of PF through doing a PF course like financial mechanics or the new Wall Street Prep PF course. Technicals or things to know would be very basic stuff like how would you arrive at decision to lend to a project, how would you arrive at a decision to invest in a project (IRR, RAROC), understanding when/why sponsor would choose greenfield vs brownfield or vice versa, important ratios of PF (LLCR, DSCR, etc), and key characteristics & financial metrics of sectors like airports (can be found in ratings' methodologies/criteria which they may make you read anyway).
All of that is probably overkill but you will learn a lot about PF. Good luck!!
Project Finance might be different. P/U sector coverage is generally same as any other IBD group in terms of group placement. Get a generalist offer and then place into that group in your group selection process. This may vary from bank to bank but is certainly true at GS/MS/JPM/Barclays, less sure on the others.
Summered as a PF intern in a Japanese Bank previously. Based on my short stint and conversations with analysts, where I was and at other European banks, I don't think you would get a good experience for Infra PE at one of the international banks. The other comments are accurate in saying that you would get a more meaningful/holistic experience from doing IB P&U instead.
PF financial work at international banks largely consists of running sensitivity analyses on pre-baked models from the sponsor. You might come across a couple of acquisition financings, but they are not all too typical. You may do pitches for M&A related stuff, but these do not necessarily lead to anything. It's not that the Japanese/European PF banks would rather just do the predictable financings (especially providing boring LCs), but they find it difficult to disabuse the sponsors of the idea that they are merely just commercial banks who don't have the expertise (advisory, origination, etc) or capabilities. The experience is probably better if you do PF at a bank like Citi or other BB but not entirely sure.
Speaking of P&U investment banking, does recruiting for P&U tend to have a similar story (generalist -> group offer) to recruiting for infrastructure/transportation investment banking in U.S. Some groups lump sum infra and power under Industrials, while others don’t.
I don't think any banks have specialized group placement for P/U, it all falls under the generalist process as far as I'm aware. At the BBs, pretty much everyone at this point has a dedicated P/U team. At a few places there is a general "energy" group or natural resources (JPM is like this), which is broken into power/utilities and oil/gas, but it would be unusual for someone to cover both, and even at the analyst level you are divided by coverage. I don't know any groups that put power under industrials. Non power/energy infra might be put under industrials, specifically if there isn't a dedicated transport group, which most banks do not have.
There seems to be a fair amount of confusion when discussing infrastructure, infra banking, power & utilities banking and what each of these entails, so just sharing for the benefit of all.
Power & Utilities IBD -- covers the full spectrum of this industry. What are some examples of transactions that a P&U banker might work on?
Large utility debt issuance (most common, most boring)
Corporate M&A, i.e. one large utility buying another -- Exelon buying Pepco as an example. These types of transactions do not happen as often, are subject to significant regulatory approval and most analysts do not get exposure to them.
Individual Asset Sale -- while only a single power plant, these transactions can be quite large ($1bn+). This would most commonly involve a sponsor selling an asset in its portfolio the advisor would work for the seller.
Sale of Portfolio -- large corporate divests its generation assets. For example LS Power buying 4,000 MW generation portfolio from TransCanada. These can be conventional (coal/gas) portfolios or renewable portfolios as well and advisors are hired by both the seller and the buyers.
IPO of renewable player. Less common, but SunRun going public back in 2015 would be an example of this and would be led by the P/U teams at the respective banks on that transaction (CS, GS, MS) (likely in tandem with the tech teams).
Infrastructure Banking -- this is a very broad term, and this sector is generally lumped inside of other sectors from a coverage perspective, be it Diversified Industries, Industrials, Transportation or in some cases a small and dedicated Infra IBD Team. I've not heard of any of the larger banks having an "Infra" team. JPM has DI, MS has Transportation (which also covers airlines and auto), GS this coverage is all mixed across industrials, power, energy. Coverage would include the rest of the infrastructure sector, specifically rail / transport, airports, roads, telecom towers (if not covered by M&T group), water and waste infrastructure. There honestly aren't that many deals happening in most of these, particularly of any substantial size, which is likely why you don't see dedicated "infra" groups at the BBs.
Infra PE Funds -- this can be broken into general infra funds (GIP would fall under this category) and energy infra funds (First Reserve would fall under this category). For the general infra funds, they will cover everything, and therefore recruiting could be from an Infra IBD group (if it exists), a Power & Utilities group or even a natural resources group. That being said, a significant portion of the deal activity in general infra is on the energy side of things (O&G or power related). For the energy focused Infra funds, they will invest in assets related to power as well as upstream oil and gas to midstream and downstream, including resources, equipment and services, and associated infrastructure. They will bid on individual assets and portfolios of assets. These funds often have an East Coast and Houston office and divide their team into power / oil&gas, with the O&G team coming from a natural resources IB background and the power team coming from a P&U IB background.
Hopefully this clarifies some of the differences between these teams / groups and how coverage works. If you want to be at an infra fund, the most sure bet is to work in a P&U group or natural resources (Houston). After that general industrials or M&A would be the others to look at. No harm going into an infrastructure investment banking team at RBC, but you'd be doing yourself a disservice by trading down significantly in brand quality to cover that sector.
Very helpful, thanks!
thanks!
Any idea of the PF market in Australia and the reputability of the “big 4 banks” internationally?
Public finance -> infra PE. Can it be done without a stepping stone role like Infrastructure IBD?
I’ve seen it done, but not often.
In a project finance group you are going to be mostly working on highly contracted, lower risk assets issuing non-recourse debt. While the asset focus might seem useful for infra PE, you’ll get sponsor equity experience on asset / portfolio divestitures in a P&U group. Private equity funds want that equity experience.
At a top shop, a project finance role can be useful and open up doors. it can especially give you exit ops in an internal m&a and business development role at an IPP, especially since you’ll be doing a lot of similar structuring on your portfolio of assets there.
Project finance isn’t a bad option - exit ops into infra / power IB groups are strong, and it’s a great way to develop infrastructure technical skills, which are fairly difficult to develop.
Another helpful comment by @DStudent1995" that I saw today. Guy knows what he's talking about for sure.
Great post. Not to hijack OP's thread, but I am looking at Infra PE myself in the future and wondering whether it would be best to target project finance teams or P&U teams? It seems like the consensus here is P&U since it gives a better transactional overview, but project finance is much more technical from a modeling perspective.
P&U better as everyone said.
Pick a large infra-fund and look at their associate-VPs: the vast majority of them will come from your typical P&U/Energy/Infra&Transport IBD team. This might look different at the partner level but there have been meaningful industry changes in the last 20 years that change the trajectory of today's infra & energy professionals.
And this is coming from someone who has worked across PF, IBD industry group and infra fund and would personally favor the PF skillset for an investment role. Your recruiter will put forward P&U BB candidates over PF candidates each and every time - not only because they are ignorant as to who builds the more complex models but because that's whats asked of them by their clients (infra funds).
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