LevFin to Infrastructure: The Need to Build

All, I have come to this forum in hopes that someone will impart wisdom to me. Here is my story.

COVID-19 fatigue. It's something that's been discussed ad nauseam on WSO. I hated my job in levfin, and chances are, if you're an investment banking analyst, then you probably hate your job right now, too. I hated my job so much that I quit two months ago. I had no job prospects lined up or anything, but I don't regret it. I was simply going insane and tired of being treated like crap. 

For weeks, I grappled with the question of what I should do next. Unlike others, who would sacrifice their unborn child for a job at KKR, private equity never got me excited. Further, I realized my background was not going to cut it in private equity long term (average college grades, midtier levfin group, etc.) Knowing that I did not care about private equity meant that I would not need to go back into LevFin or coverage or M&A. I went back and forth on the idea of joining a more chill bank, doing a more laid-back banking role (e.g. corp. banking), breaking into a F500 job, but there wasn't anything that seemed to get me going. Corporate finance, in general, simply doesn't excite me. And then, I began to think about what did excite me. Roads, energy plants, cell phone towers, airports... infrastructure.

Before I transferred to levfin, I spent some time in IG DCM where we dealt with electric utilities often. I began to become entranced by the idea of electricity and power. On my evening walks, I would look up and see powerlines, then I would look to the houses next to me lit up with Christmas lights. I got, for lack of a better word, turned on by electricity. Then, I transferred to a levfin group at my bank where I no longer worked with my precious utilities. I worked mostly in TMT. When working in TMT, though, the sexy, high-growth software companies didn't get me going. Broadband, on the other hand, got me feeling warm and fuzzy inside. How sick is it that we live in a society where you can have gig speed internet at your home? More so, how disturbing is it that 29% of NYC residents don't have broadband? 

I believe over the last year, I have uncovered what excites me. Normal businesses don't excite me. Infrastructure, which provides real value to many people, is what gets me going. An ideal job for me would be working in a clean energy infrastructure fund, or even better, directly working for a solar + wind + battery developer. I always regretted not pursuing engineering in college, and I believe this could be a great path for me.

So... I need advice. Who can lead me to the glorious path of infrastructure? Who is ready to help me out and inspire an eager learner? 

I'm ready to grind, and I'm ready to build.

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Comments (29)

Feb 26, 2021 - 11:05pm

Feel like I wrote this, been looking for the same thing too.

Quant (ˈkwänt) n: An expert, someone who knows more and more about less and less until they know everything about nothing.

  • Associate 1 in PE - LBOs
Feb 28, 2021 - 3:19am

Hey, I'm in the clean energy space and can probably be pretty helpful. Happy to walk through any questions on a call. PM me if interested

Apr 13, 2021 - 8:43pm

Can you PM me, can't figure out how to PM private account. Have some specific questions.

Quant (ˈkwänt) n: An expert, someone who knows more and more about less and less until they know everything about nothing.

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Most Helpful
Feb 27, 2021 - 10:59am

I am going to ramble about my experience in the infrastructure space. Hopefully, something clicks to help you with your direction and to tell your story during networking conversations.

The best part about infrastructure PE is that the backgrounds from which its junior employees hail are far more diverse than traditional buyout funds. When you start looking to leave, the one thing that I can advise during your search is the difference between going to a pure infrastructure investor v. a PE firm with an infrastructure arm. Not in all cases, but more often than not, the former is more forgiving than the latter, in terms of background.

The pure infrastructure investing firms, that I work with, do not like the label of "infrastructure PE" and instead prefer being called an "infrastructure investor". From the view of public partners, buyout PE is seen as "the bad guy" that buys a company, loads it up with debt, fires people, streamlines business processes, and then sells it 5-7 years later. While our projects are typically greenfield and totally dissimilar from the buyout approach, public partners don't like to be associated with 'that way' of generating value. This lets our key partners and stakeholders know that we do not plan this to be a 5 or 10-year investment. At the minimum, it is 12-years, but typically our projects (in the broadband & energy space) are a 25-year minimum. Anecdotally (2-3 pure infra investors & 3-4 buyout firms w/ infra arms), pure infrastructure investment firms have hold periods between 15-25+ years while buyout PE firms with an infrastructure arm have hold periods between 7-15 years. When networking with infrastructure PE firms, try to find their fund length and match your interest approach to theirs. If they have a 25-year fund life, they likely plan to never exit. Use that knowledge to your advantage to explain why you're interested to invest in long-term infrastructure v. building, operating, and selling.

Just to maybe help you craft your perspective... Our goal in every project is to build the highest-quality, longest-lasting, future-proof, cash-flowing asset that meets return metrics without ever considering an exit to meet our return threshold. Since we plan to own the asset in perpetuity, not relying on an exit, our due diligence process is detailed and nuanced. To hold in perpetuity, we need to manage and successfully mitigate risk, down to the basis point, for every key stakeholder (engineer, contractor, operator, service provider, creditor, public partner, management team) in each of the five steps of the project finance/greenfield project process: Design, Build, Finance, Maintain, and Operate.

You're only a small distance into your career. You can use your experience in the TMT / utilities space easily to craft a story as to why you want to invest in infrastructure. I also have a few posts somewhat related to "Why Infrastructure": Here & Here.

If you want to chat more, feel free to PM me.

Edit: grammar

  • Intern in IB - Cov
Feb 27, 2021 - 12:48pm

This is great info, thank you. In your experience, what banking groups do you see juniors coming from? IB Utilities, Public Finance IB? Curious as there generally aren't large infrastructure IB groups as far as I'm aware

Feb 28, 2021 - 3:56am

Great post. Hoping to get your thoughts on my situation if that's cool.

Context: I worked in the infra advisory team of a big 4 for nearly 2 years, didn't see a model at all, just built pitch decks (that's just how the team was managed unfortunately). Now I'm in a bit of a bind: don't qualify for entry level jobs to build the skills I need, can't land associate roles cos they already expect me to know how to model, do due diligence, etc. 

I've done a project finance modelling course, built a sample model through that, but interviewers keep telling me they had to go with another candidate who had live-deal modelling experience. Any advice on how to work around this? For additional context, I'm not in North America but Asia (Singapore). Willing to consider funds, banks, consultancies, and developers to get the right experience. 

Feb 28, 2021 - 10:45am

Full disclosure, I do not know very much about Asia-focused infrastructure. Our focus is almost solely North America.

That being said, my advice, independent of location, would be to find a developer or project finance sponsor. I know there was a comment below commenting to be wary about developers / non-contributing sponsors, but I think that could be anecdotal. There are a number of developers who are PE-backed who earn the majority of their comp through sweat equity. Therefore they are alongside the investor, and the developer is not exiting at the close of financing. There are also a number of very bad developers (I know because I worked for one a while back) who will pitch projects but never sign a term sheet or receive PE-backing. Do your research before taking this route.

I think trying to jump directly into an infrastructure investor w/ LP's is going to be a lot harder because you do lack the requisite experience. You can't really start at a LMM infra shop because infra deals aren't usually done at small check sizes. Starting at a developer or trying to break into a PUI / LevFin group at a bank might be the best way to get there. I suggest the banking route because you might be able to sell that story a bit better to them, and then move to infra. Another anecdotal POV, but a lot of infra investors don't have the same aversion to hiring an associate / senior associate as a lot of buyout funds.

  • Analyst 1 in IB - Cov
Feb 28, 2021 - 5:48pm

Thanks for sharing! How would one go about landing these infra fund roles out of pubfin? 

Feb 27, 2021 - 1:16pm

Currently work in infrastructure investing, I think some of what you say is true but some important cautionary notes. 

You should consider where in the field you want to work. You've noted developers or a clean energy fund. These will be extremely different groups of people. Most developers lack sophistication and work quickly to get deals done typically with shitty, broken and normally wrong financial models in my experience. It doesn't really impact them because often they're getting in and getting out. A conventional fund or large infrastructure consortium member/construction company will be much more sophisticated but most of your time will be spent on structuring and you will notice that your love for the tangibility or benefit of the assets will dwindle over time. At the end of the day these transactions can be very repetitive, with similar structuring considerations like holdco leverage, shareholder loans and other tax optimization, grantor negotiations etc. 

You should have a think about greenfield versus brownfield, most funds will be brownfield but obviously this can vary. As well, you should think about PPP (roads, bridges, airports) versus renewable energy. Most major participants will not compete efficiently across both and as such you will likely have to choose unless you're at a firm with internal mobility to competing in both see: MIRA or something of the like. 

My only cautionary note is that working in infrastructure means for the most part leaving working on companies to working on assets. This is great because processes and strategies are repeatable. However, it can be boring when you replace corporate strategy evaluation for tax and structuring in my experience particularly on core infrastructure assets where so much of the money is. There's a ton of diversity in what type of company you can work at so your mileage may vary. Being an associate at Sidewalk Labs versus being an associate at John Laing will be an extremely different experience so it's worth diving into who the players are, what they do, and what you think you'd like. Your analysis of infrastructure as a class being interesting is a bit to broad at the moment to give a formal recommendation.

Feb 27, 2021 - 1:28pm

Thanks for all the good info! I think you're definitely right about me needing to figure out what interests me with regards to the type of infrastructure / type of company. I think I'm still figuring that out. Again, I really just came to this realization of me wanting to be in infrastructure over the last month. 

Feb 27, 2021 - 1:33pm

No worries, I think it might be helpful to the extent you can move over to an infrastructure group in a bank it would allow you to get exposure to who the players are. Believe those groups have been discussed at length on the platform. Outside of that if you can get access to Inframation it has a ton of information on who the players are in specific subsectors of infrastructure and believe me the answers will surprise you / the major firms will often not be household names to non-infrastructure folks. 

I think at the end of the day the key questions will be 1. PPP / availability style deals 2. renewables 3. core plus where you can dabble in both. Once decided, the question will then be financial sponsors versus strategic with the usual difference in compensation, WLB and "doing interesting stuff" taken into account at this stage. If you're looking to park yourself I think a solid pension gig can be a great way to access cool projects with pretty limited career downside (this is if you want to treat your career like the assets you want to invest in like I do). 

Feb 28, 2021 - 12:36pm

CanadianEnergyBanker

If you're looking to park yourself I think a solid pension gig can be a great way to access cool projects with pretty limited career downside (this is if you want to treat your career like the assets you want to invest in like I do). 

Are you referring to the big Canadian pension funds (OMERS, Ontario Teachers, CPPIB, etc.) that have infra teams?

Also, other than through work, do you know of another way to access Inframation?

Quant (ˈkwänt) n: An expert, someone who knows more and more about less and less until they know everything about nothing.

  • 2
Feb 28, 2021 - 1:52pm

There's a lot more than just those names but yes all of the firms you listed are major participants; you can think beyond Canada too CALPERS, CALSTERS, the Australians, Abu Dhabi etc all players. 

Not sure on this point, if you have access to CapIQ you can get a sense by looking at precedents or maybe IJGlobal? Not totally sure I've become accustomed to have access to these sites but CapIQ may be the most widely accessible DB

Feb 28, 2021 - 3:50pm

I actually just got access to CapIQ and Market Intelligence this past week so I'll have to take a look.

I'm aware of the pension funds you're referring too, but specifically for CalPERS and CalSTRS, do they have direct investment teams for infra that the other larger global pension funds have? Both being in Sacramento, which isn't exactly the most exciting city, I'm a little curious how into the weeds they get on those deals. Same goes for the large Texas pensions (TRS and ERS I think).

Quant (ˈkwänt) n: An expert, someone who knows more and more about less and less until they know everything about nothing.

  • 2
Feb 28, 2021 - 4:48pm

These guys mostly back Capital Dynamics frankly, don't do much direct investing

Array

Feb 28, 2021 - 4:20pm

Great words. I work on the debt side and a lot of the IMs we get are from shiny-eyed developers who frankly speaking have no idea of the magnitude of the transaction that they are contemplating. Not that it's a bad thing, but on the equity side there are a ton of firms which are pretty "meh". I like the debt side particularly because we can be selective with which deals would be interesting for us.

Apr 14, 2021 - 4:05am

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