Seizing the Generational Infrastructure Opportunity

Can you share a bit about yourself and your background?

I grew up, and spent a significant part of my life, in India. My career journey began in India, where I started in banking before moving to London in the early 1990s. I worked with Credit Suisse, focusing on oil, gas, power, water, and M&A deals. That's where I met five of my other founders of GIP. Bayo Ogunlesi was running the investment bank at that time. I did a bunch of deals with him.

That's how GIP started in 2006, and the rest is history. Since then, we've grown the firm and continued to build on the business.

What was it like being an infrastructure investor in 2006?

It was a different world. When we were trying to raise capital for GIP, we would go talk to all the institutional investors around the world, and be either sent to the fixed income bucket, the private equity bucket, the real estate bucket, or sometimes agriculture and timber.

The infrastructure asset class has grown massively in the last 18 years, and that's been an exciting journey. And what’s ahead is even better - there are so many macro trends that are driving it.

What do you see as the big trends driving infrastructure?

We see four major trends driving infrastructure investment. The first is the decarbonization of the global economy, which requires significant amounts of capital. To meet global decarbonization goals by 2050, we’ll need tens of trillions of dollars in infrastructure investment. Whether or not we meet those goals, money will flow towards building infrastructure to support decarbonization. This will involve not only repurposing existing assets but building new infrastructure to meet growing energy demands while reducing emissions.

At the same time, you have AI and the ongoing digital revolution. The numbers in data centers are staggering even before you consider the advent of AI. What needs to happen in telecom infrastructure is equally huge. Everyone wants 5G connectivity, 4G connectivity, even when you are in the remotest places in the world. How does that happen?

It happens by putting up telecom towers, and the amount of capital that needs to go into telecom infrastructure is huge.

These rapid advances in digital technology and decarbonization have to build on existing infrastructure. You just have to travel around and look at the state of the airports or the state of the roads. Europe is slightly better than the U.S., but even they need a massive upgrade. The capital that needs to be put in to upgrade existing infrastructure is massive.

The final trend is nearshoring and friendshoring, reorienting supply chains to align with what’s happening around world trade. Emerging markets are a huge opportunity from an infrastructure perspective. In Southeast Asia and Latin America, the opportunity to build and upgrade infrastructure will be huge over the next 30-plus years.

What role does corporate capital play in infrastructure investment?

The scale of investment required to meet the world’s infrastructure needs, particularly for the low-carbon transition, is simply too large for governments to shoulder alone. While some governments, particularly in the Middle East, may have the balance sheets to support these investments, most will not. Corporates, capital markets, and institutional investors will play an essential role in financing the necessary infrastructure. And public-private partnerships will be crucial to bridging the funding gap and ensuring the continued growth and resilience of global infrastructure systems.

How does the combination of BLK and GIP change the opportunity set?

The partnership between BlackRock and GIP has been a game changer. It allows us to leverage BlackRock's relationships with publicly listed companies and institutional trusts to secure significant deals around the world. The combination of BlackRock's long-term investment approach and GIP's expertise in infrastructure has created a powerful synergy to create the possibility for deals that might not have happened if GIP was on its own. To me, that's the power of the combination between BlackRock and GIP.

What differentiates GIP's investment process?

I'd say there are a few things that differentiate us. Our definition of infrastructure is narrower than our competition, focusing on energy infrastructure, digital infrastructure, and transport infrastructure. This gives us the expertise to do corporate joint ventures with industry leaders in these spaces. Our approach to them is that these companies have big assets that they need to use, but don’t need to own. Through a joint venture, we offer to improve the operational efficiency of those assets. That operational improvement is a second key differentiator. As an investment, infrastructure has defensive characteristics, but infrastructure needs to be managed, or the companies will not perform.

Our experience with the lifecycle of infrastructure assets and with institutional investors is another differentiator, along with the stability of our team. Our founders have been together for over 19 years, which really allows us to deliver continuity in our investment approach.

Can you walk us through your process for executing investments?

The AI opportunity set is a good example. As we were brainstorming with BlackRock leadership, we asked, “what are the big trends that are happening?” And we talked about the fact that data centers were a massive opportunity. We had previously invested in CyrusOne - one of the largest data center companies in the U.S. It’s already building data centers for Microsoft and Google and Amazon and all the hyperscalers.

We already own and operate that, so we said to Larry, look, this is going to be a huge trend. He asks us how much capex is going to go into it, and we said, this is $300, $400 billion a year and growing. It could get to $1 trillion a year by 2030. He asked, “who's going to fund this?” And it soon became very clear that GIP did not have access to the absolute top levels in the corporates. Larry suggested we get on a plane and go and meet the CEOs of Microsoft, Google, and all the large companies building hyperscale data centers. They all agreed there’s this huge expenditure ahead, and they don't want to fund all of it. That's how the concept for the part started.

Ultimately, we are thrilled to partner with Microsoft, NVIDIA, xAI and MGX to help raise capital. This is industry-opening, industry-leading. The equity can work with the debt around it, because data-center revenues are all 15-year contracts, 20-year contracts with large industry leaders. So we can use the equity to raise debtfinancing to unlock more capital to invest into data centers and power, because without power, there is no AI. Now we’re continuing our dialogue with hyperscalers and investors. And hopefully, we'll be announcing more industry partners coming in, which will even further strengthen what we're trying to do. GIP, on its own, would not have been able to pull this off. I think Larry will say this, that BlackRock on its own would not have been able to pull this off.

What are your thoughts on the future of infrastructure investing?

is incredibly exciting. The macro trends driving investment, such as decarbonization, AI, and upgrading existing infrastructure, each present significant opportunities. In all of these areas, there are major corporate players who need to invest in large-scale infrastructure assets but don’t need to own them. That’s where investors with operational experience and deep relationships can make a big difference and deliver strong returns.

The partnership between BlackRock and GIP will continue to unlock these opportunities and drive growth in the infrastructure asset class. We anticipate trillions of dollars in annual investments over the next 20 to 30 years, making infrastructure a key component of global economic growth, as well as asset allocation for investors in the years and decades ahead.