KKR Sees ‘Incredible’ Opportunities in Digital & Energy Infrastructure

KKR is one of the industry leaders in the private equity sector.  KKR focuses on a variety of business segments, but the firm has taken a strong focus on Energy, Digital, and Real Estate assets that support the growth of infrastructure.  The firm’s co-CEO Joe Bae had a lot to say about the future of infrastructure and the essential role private equity will play

“More private capital will pour into infrastructure, as institutional and retail investors look for stable returns and hedges against inflation.  Healthy and growing private fundraising will fill in for insufficient infrastructure funding by governments,” Bae comments.

Bae’s comments hint at KKR’s intentions to deploy billions of dollars into infrastructure investments.  The KKR Global Infrastructure Investors IV fund was the largest US-based infrastructure fund to close in 2022 amassing nearly $17 billion in commitments.  The fund focuses on assets and companies in member countries of the Organisation for Economic Co-operation and Development.  There are 38 member counties within the global organization.

The largest use of those funds to date was a $15 billion dollar deal headlined by KKR and Global Infrastructure Partners to take CyrusOne private in August.  CyrusOne is a Dallas-based company that owns and operates over 50 data centers around the world.  CyrusOne data centers help businesses and governments around the world with data solutions tailored specifically to client needs. 

One of CyrusOne’s data centers in San Antonio, Texas

Bae also commented on the importance of energy-related infrastructure saying “trillions and trillions” of spending are needed to decarbonize Earth in coming decades.  Bae went on to point out that, “many governments face constrained budgets post-COVID-19-stimulus, they won’t be able to afford to build that critical infrastructure.”  He continued to reference how, “The private sector is going to have to step up and play a bigger role and that is part of the reason why you’re seeing the alternatives space grow dramatically in infrastructure.” 

The firm’s exposure to infrastructure has exploded in recent years.  KKR’s infrastructure AUM grew from $17 billion in April 2021 to $50 billion as of September 2022.  Bae highlighted the regular and predictable cash flow inherent to infrastructure assets tied up in long-term contracts, most of which are hedged against the US Consumer Price Index, which is a measure of inflation.  Those are the characteristics that make the infrastructure attractive to retail investors.