Megafund Infrastructure PE?

I'm late stages of an interview process with the infra arm of a megafund (think KKR, Carlyle, BX). I like the group and I'm not totally opposed to infra, but would I be pigeonholed if I took this offer or would the brand be able to compensate? Would an MBA at HSW help if I wanted to transition to corporate PE afterward or are the skillsets too far apart?

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Comments (18)

Jul 26, 2020 - 10:56am

Depending on which group it is, the modeling is similar to corporate. You're effectively valuing contracts/performance rights that shed cash rather than actual businesses, but the investment approach is similar enough than something more asset-centric like real estate.

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  • Associate 2 in PE - Other
Jul 26, 2020 - 4:34pm

Half the shit that's being classified as Infra nowadays are basically operating companies that have "infra-like" characteristics. See for example the lineage logistics deal or all those smart metering companies.

People from my firm have left our infra team to go to corporate buyouts at other firms. If you are a 3rd year analyst, without a corporate buyout offer, I'd take the infra offer and you can recruit after your two years or post MBA.

Question would be on my end - infra is likely an easier field to progress in / compensated roughly the same due to how quickly its growing. Is there anything that is specifically driving you to want to corporate buyouts vs. infra PE? Lots of money to be made in infra.

Most Helpful
Jul 26, 2020 - 5:03pm

My firm works closely with one of the firms with whom you are interviewing. I know a lot of infra seems geared towards project finance as the primary deal type. I used to think the same thing, but it's actually more of a mix.

Some of the funds above and other MF / UMM infra players also look at different stages of maturity. With a MF, we are currently working on a purchase of a three-year-old telecom (late growth stage project) player to inject "growth equity: (but structured w/ debt hence the quotation marks) to expand to surrounding towns. I know it sounds like an LBO, but the company is not considered mature since it does not have supremely steady cash flows. It's a mix of a PF, LBO, and growth equity structure since the SPV is actually being acquired. For this deal, they are looking to expand to 5x the population then sell, in 5-7 years, to a large internet provider (ATT, Verizon).

With an UMM infra fund, we are currently working on purchasing a ten-year-old telecom (mature project) player, they want to add 5G to their fiber network and aggressively market to grow the household and business internet take rate within the existing infrastructure, and sell the company in 5-7 years.

Both of these are being done w/in their infra arms.

TLDR: The definition of infra is growing to be pretty malleable (differentiating between assets, projects, and companies), and you may have the opportunity to work across different verticals / stages.

Jul 27, 2020 - 11:02pm
11A-Analyst:

I am a bit earlier in the game than you are

That's an interesting deal experience. Do you mind if I PM you about infra?

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  • Associate 2 in PE - LBOs
Nov 25, 2020 - 7:20pm

It depends on the firm/team. Some infra teams have better hours than non-infra teams at the same PE firm. Others have significantly better work-life balance cultures. Compensation for private equity groups is generally linked to revenue per head (mgmt fees and carry) and varies based on year/fund performance. With similar fund-economic structures and lower headcount per AUM (not a hard and fast rule), infra teams can be very profitable and offer high compensation at both junior and senior levels. As far as I know, MF analyst/associate all-in compensation is identical across infra and non-infra.

TL;DR: all depends on the specific firm but don't expect better hours or lower all-in compensation from analyst to partner

  • Associate 2 in PE - LBOs
Jul 29, 2020 - 1:38am

Definitely won't be pidgeonholed. Lot of deals done out of infra might as well be done out of traditional buyout funds. Know our team competed with infra funds in some auctions, and they were targeting similar leverage and returns. Infra funds do a lot of traditional LBOs of infra-ish companies, so that's the exact same experience. Same modeling / analysis work needs doing. On comp, think infra associates get same all-in comp as other industries at the megafunds. Don't know about VP and above, but same fund terms and carry structure probably translates to similar comp at all levels.

  • Director in PE - LBOs
Dec 3, 2020 - 8:16pm

Agree with most of this, except for the last sentence. 

The carry structure (20 over 8 or whatever) might be the same between infra and traditional PE, but all else equal, the absolute pot will be higher for the traditional PE fund (the IRR / CoC is higher). That should translate into higher individual carry payments.

With that said, if you're at a strong performing fund on either side, you'll make more than enough that it doesn't really matter.

  • Analyst 3+ in IB - Cov
Dec 3, 2020 - 8:24pm

Not necessarily true.

Look at GIP's returns over their various funds: https://www.pcr-ma.org/sites/default/files/fileattachments/general/page…

Returns have gone down with increasing AUM but when they were in the $5-10bn fund range, they were making 20% on corporate infra investments. Their most recent fund raised last year is $22bn now. 

And generally in the LMM PE funds I've seen around infra-focus, where there's mandate flexibility to invest in singular assets, have seen 3-4x MoM in a ~5 year holding period implementing capital recycling strategies

Your more vanilla infrastructure funds / pension funds / insurance co-investors will have lower returns investing for sure in plain renewables or core assets for sure but infra-devoted PE funds are still pursuing the same return thresholds that generalist PE funds have

  • Associate 1 in PE - LBOs
Nov 30, 2020 - 7:37pm

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