Produced in partnership with Macquarie Asset Management.
In ice hockey, Canadian Wayne Gretzky, who played 20 seasons in the National Hockey League and retired in 1999, is widely considered to be the sport’s GOAT (sporting jargon and acronym for the “greatest of all time”). What made Gretzky so good was his ability to read the game and anticipate his opponent’s next move, a skill that he credited to his father, Walter, who used to tell him, “Skate to where the puck is going to be, not where it has been”.
Ani Satchcroft, co-head of infrastructure for Asia Pacific at Macquarie Asset Management (MAM), has never met Gretzky nor is she an avid spectator of ice hockey but her investment philosophy is remarkably similar.
When Satchcroft and her team think about infrastructure, they look for three key factors: critical assets that are essential to support economic and social activity; predictable and stable cashflows, which may be linked to inflation; and the new services increasingly needed for a high functioning community.
“We’re really focused on where infrastructure is moving and where there’s unmet need in the community,” she tells Professional Planner.
“As communities develop, modernise and digitalise, we’re looking for the emerging types of infrastructure that will be necessary for them to function.”
This approach led MAM to be an early investor in data centres. In 2020, it acquired a majority stake in hyperscaler, AirTrunk, in a deal that valued the company at around $3 billion. Four years later and following a period of active management by MAM to support the company’s growth, Blackstone acquired AirTrunk for $24 billion, marking the largest-ever data centre deal globally.
Similarly, MAM was one of the first infrastructure managers to invest in land and motor vehicle registries.
This first mover, skate to where the puck is going mentality also lies behind Macquarie’s broader asset management strategy. Earlier in the year, the group divested its public investments business in North America and Europe, citing a desire to further develop MAM’s platform as a leading global alternatives manager.
“This transaction will allow MAM to build on our leading global position in private markets, and our leading position in Australian public markets,” Ben Way, head of MAM, said at the time.
According to Satchcroft, it all comes back to anticipating the needs of the community and investors and finding the areas where Macquarie can best contribute and add value.
“We spend a lot of time thinking about the future and we like being early,” she says.
“We think, where in the community is the most need for capital and expertise, and how can we provide it?”
Long-lasting, tangible and positive
While institutions like superannuation and sovereign wealth funds have been investing in infrastructure for decades, wholesale investors are still building their understanding of the asset class’s unique characteristics, including long-term cashflows that can often be inflation-protected.
Satchcroft says the potential benefits of infrastructure can appeal equally to institutional and private wealth investors, including diversification, generally stable returns and the ability to invest in assets with a profound impact on society.
“Infrastructure assets, on average, have been less volatile than asset classes like public equities and traditional private equity and because they provide essential services, there is high cashflow visibility and often a level of inflation indexation,” she says.
“Also, many people investing some of their personal wealth in infrastructure like the idea that they are contributing to something that will have a long-lasting, tangible, positive impact on communities.”
Satchcroft cites data centres, fibre networks and telecommunications towers as examples.
“If, as an individual, I’m thinking about where communities are moving and the services they need, I can put my wealth towards building out some of this critical digital infrastructure,” she says.
Four Ds driving growth
There are four mega themes underpinning the long-term growth of infrastructure, according to Macquarie. They are demographics, decarbonisation, digitalisation, and de-globalisation.
In the Asia Pacific region, demographic changes are particularly evident.
Asia and the Pacific region are home to over 4.3 billion people, representing around 60 per cent of the world’s population. Not only is the Asia Pacific rapidly growing but it’s rapidly ageing too, with the number of people aged 60 years or older expected to more than double to 1.3 billion by 2050.
The middle class is also getting wealthier, underpinned by economic growth and reforms.
“Demographic changes are driving an evolution in how infrastructure is being used, as well as the need for different types of infrastructure,” Satchcroft says.
“For example, the increased wealth effect means that people are more likely to use infrastructure for private vehicles than they have historically, whilst the ageing population is driving demand for infrastructure focused on aged care and healthcare.
“It’s important to break the APAC region into its component parts and think about what the drivers are, and the corresponding infrastructure needs.”
Decarbonisation, digitalisation and deglobalisation are broader global themes.
Globally, governments, corporates and investors are focused on reducing their carbon footprint and supporting the transition to clean energy, in line with the Paris Agreement, which established a universal framework for climate action.
Although the United States recently withdrew from the Paris Agreement (for the second time), more than 190 countries remain committed to combating climate change under the Paris Agreement and this commitment is underpinning significant investment in green infrastructure including the building of renewable energy sources like solar, wind and hydroelectricity, and grid networks to aid increased electrification.
In terms of digitalisation, Satchcroft says there has been a data explosion in recent years which looks set to only intensify and accelerate as AI tools become more popular, affordable, and energy efficient.
“People are using, creating, storing and moving data around more than ever and this is an important part of digitalisation,” she says.
“It is critical that data and the movement of data is safe, secure and reliable, which is why we’re particularly excited about fibre networks in the region.”
The deglobalisation theme, which Satchcroft also describes as “resiliency,” relates to ensuring that networks, encompassing logistics, supply chains, and communications, are supported by robust infrastructure. In the current uncertain economic and geopolitical environment, resiliency has never been more important.
Perfect illustration
To highlight MAM’s investment philosophy and process, Satchcroft points to the July acquisition of TPG Telecom’s enterprise, government and wholesale fixed business and associated fibre assets by Vocus, the telecommunications and network solutions provider that MAM and its partners acquired and took private in 2021.
By acquiring TPG’s fibre network and bringing it together with Vocus’ existing footprint across Australia, MAM has created a key digital infrastructure challenger that should benefit consumers and increase competition in the region, Satchcroft says, pointing out that the deal captures the aforementioned themes and also perfectly illustrates the way MAM invests.
“We like to invest in assets we can grow. It’s not just about capital but also adding value. Given we’ve been investing in infrastructure around the world for decades, we bring significant global expertise to help management teams grow and operate the assets in our portfolios,” Satchcroft says.
Macquarie’s initial investment in Vocus was years in the making. It spent years researching the business, meeting with management, and tracking the company’s progress. It also examined the broader digital infrastructure ecosystem.
“In any sector, we don’t just look at a single asset but the ecosystem in which it operates,” Satchcroft says.
“We had already invested in telecommunications towers, data registries and data centres, and the obvious missing touch point was fibre. We knew a lot about the various fibre providers and their strengths because they were either customers or providers to our other infrastructure assets.”
Being part of an ecosystem enables Macquarie to build a deep understanding of a sector and identify gaps in terms of both capital and expertise.
“We’re investing large amounts of capital; in the case of Vocus $3.5 billion and TPG $5.25 billion, a responsibility we take seriously, so it’s not just about the short-term but the go-forward trajectory, which comes back to our focus on where are communities moving,” Satchcroft says.
“We want to invest in sectors that are growing and have good tailwinds and need ongoing support to continue growing.”
