Private markets investment firm reveals insights
According to a recent report by Stafford Capital Partners, the window of opportunity for acquiring second-hand stakes in infrastructure at attractive prices is currently open. However, industry experts warn that this window may close by 2024 as more capital flows into the market.
Currently, a relatively small percentage (less than 10%) of institutional investors utilize the secondary market for infrastructure deals. However, this is expected to change as global funds search for asset classes that offer stable cash flow. Stafford Capital’s Chairman, Brett Himbury, believes that infrastructure investments fit this description.
Secondary markets allow investors to sell part of their stake in an asset they acquired earlier, such as an airport or office tower. These transactions provide insight into the underlying values of assets that are not listed publicly. Goldman Sachs Asset Management has even amassed over $15 billion through vehicles dedicated to acquiring private fund stakes on the secondary market.
Infrastructure investments have proven to be a bright spot in the secondary market. In the face of a global economic slowdown and a high interest-rate environment, investors are seeking new avenues for investment. As equity markets fall, institutional funds find themselves over-allocated to alternatives, resulting in a phenomenon called the denominator effect. Consequently, these funds have moved to reduce their exposure to alternatives and explore new opportunities.
However, despite attractive prices and quality assets available for purchase, attracting capital into infrastructure secondary markets remains challenging due to the denominator effect. Himbury emphasizes that this presents a missed opportunity for investors, as the current value of infrastructure assets is at its highest level in over a decade.
As the secondary market gains more attention, it is clear that the demand for infrastructure investments will continue to rise. Investors should be aware of the changing dynamics in the market and act accordingly before the window of opportunity closes.
Stafford Capital: Managing Assets and Capitalizing on Infrastructure Opportunities
Stafford Capital, a reputable asset management company, currently oversees a staggering $8 billion in assets. A significant portion of this amount, approximately $1.8 billion, is invested in infrastructure projects. With a diverse portfolio comprising over 350 assets across various sectors including social infrastructure, renewable energy, communication, transportation, and utilities, Stafford Capital has successfully positioned itself as a key player in the market.
According to a recent report by Blackrock, there is a compelling opportunity to acquire high-quality infrastructure assets at lower prices on the secondary market. This trend is expected to persist until 2024. Tom Himbury, CEO of Stafford Capital, anticipates that the demand for infrastructure investments will experience a surge, driven in part by the peaking of interest rates. However, it should be noted that as more investors enter the market, the window for attractive purchasing opportunities may gradually diminish.
Himbury suggests that as more capital flows into the market, the discounts associated with infrastructure assets may shrink. A loosening of monetary policies is expected to encourage funds to allocate more resources to unlisted markets. This shift will likely benefit pension funds, which will gain greater financial flexibility in determining their investment strategies.
Although geopolitical uncertainties persist, Himbury believes that the investment environment in the coming year will be more favorable for investors, ultimately leading to more active decision-making. Recent projections from Federal Reserve officials indicate that three interest-rate cuts are expected next year. Federal Reserve Chairman Jerome Powell has emphasized the need to mitigate risks by ensuring interest rates are not excessively high in the face of falling inflation.
Himbury remains optimistic about the future and suggests that the relevant question is not if interest rates will come down, but when. With a positive outlook on the horizon, Stafford Capital remains committed to capitalizing on profitable infrastructure opportunities.