Infra Fund Interview
Dearest Fellow Primates,
I have been given a short-notice first round (semi-technical) interview on Monday with a strong strong Infrastructure fund (direct, not FoF), and wanted to ask if any of you knows what to focus on.
I haven't worked in an Infrastructure group, though I have had some M&A experience in Utilities and 6 months of LBO modelling at a German PE shop, so I know what direction to look in (DSCR, Regulated Returns, etc). If any apes could tell me what kind of metrics infra funds care most about, I'd be much obliged.
Thanks,
HL
In infra you gain most comfort through contracts and the various stipulations in the defined events. As you're predominantly dealing with a government entity the onerous is on the concessionaire not to screw things up too hard. So analysis of the sponsors, their project resume and the type of project are key. In project finance you’re half lawyer half banker. And generally the assets are major boring shit.
In the energy space things can be a little more out of the hands of the concessionaire, comfort will fuel supply is imperative, be it solar, wind, coal etc...proven tech is a must. A trend in the market is construction companies funding unproven projects fully through their equity as a show piece then syndicating once the market is comfortable. But unless demand is incredibly high take or pay agreements are a must.
Metrics depend on the project as infra is quite broad. But yea DSCR, LLCR, and the liability cap quantum.
God after writing this I realised I hate project finance.
Thanks Oreo, not quite sure about how you're using "comfort", but that's quite helpful.
I hear ya about PF/Infra being less cool than other sectors (my background is in TMT), but the gig seems solid and the people seem cool, so I'm quite interested in the firm.
Would be happy to hear from others on the metrics that matter for say, rail, power and ports!
HL
By comfort I mean contracts are where we source most of the guarantees (sometimes literally) that enable us to get on board with taking risk (which is minimal without the contractual backup anyway) and rationalise it to ourselves that certain risks are mitigated as much as possible under the risk push downs of the contracts.
Yea it's no doubt a sector which ride cycles better than others. But it's just not for me, my MD frickin' LOVES it!
Sorry to hear that man, so you're doing Infra PE and not enjoying it right?
Thanks for the clarification, have a banana!
Infra debt fund. We do have an equities arm but we're split into two teams.
I wouldn't take my ambivalence toward infra as an accurate sample. Our fund has a very strict risk averse remit, however MLA positions are enjoyable. I met with a guy setting up a new fund the other day and they seem a lot more badass about it, had more HY backgrounds. As with all funds it's hard to generalize.
Edit: One thing I should also mention is that infra models are huge!! A good place to master modeling.
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