There is a huge need for more investment in our railways, bridges, water systems, electricity grids, and telecom networks. As the demands on infrastructure increase, the world needs to invest an estimated average of $3.3tn per year in these assets. With cash-strapped governments unlikely able to afford those kinds of sums, private investors are rising to the occasion.

Core infrastructure assets like regulated utilities and digital communication networks are usually mature, low-risk operational assets with stable capital structures and revenues. They serve a vital role in an investment portfolio offering low-risk, uncorrelated, inflation-linked and cash-yielding opportunities that can serve as the ballast in a well-balanced portfolio. Core infrastructure is typically a safe and attractive bet due to long-term contracts with built-in inflation protection against price increases, and they are usually regulated in a way that in return for providing vital services, companies know what they’ll earn for years in advance.

By providing regular income and little chance of losses during economic downturns, a hands-off core infrastructure strategy has been the approach of many investors in this sector.

Active Core

EQT’s Active Core Infrastructure strategy takes a different view. Because many investors have been sitting back and passively managing core assets, EQT believes these assets can be under-managed and could benefit from the growth mindset of active value creation.

“We want to bring a full potential mindset to businesses that have been fairly complacent because of their low-risk business models,” says Alex Greenbaum, a partner and Head of EQT Active Core Infrastructure. “These are businesses that have historically not felt a lot of pressure to grow and innovate, so bringing that new approach of identifying new growth initiatives, best-in-class digital capabilities and leaving no stone unturned is pretty compelling.”

“We look for active value creation opportunities,” says Alex. “We want to build off of the stable, recurring cash flows of these businesses and capture incremental upside because our view is that the risk profile is not increased at all by adopting a full potential approach.”

A good example is EQT portfolio company Radius Global Infrastructure, an owner and operator of over 7,500 critical digital infrastructure sites globally, including ground, tower, rooftop and in-building cell sites and data centers. While benefiting from long-term, inflation-linked cash flows from primarily investment-grade counterparties, Radius has also identified opportunities to add new sites and invest in new technologies at existing locations rather than just being a passive landlord.

“It is fairly low risk to approach existing tenants and offer additional long-term contracted services such as adding batteries or solar power to help a customer reach their clean energy goals, or adding a mobile phone tower at an existing data center site,” says Alex. “The enormous need for capital across digital infrastructure and the energy transition is driving so many opportunities.”