Speaker 1Hi, I'm Bruno Alves, and welcome to the Infrastructure Investor Podcast. In today's episode, I sit down with Torbjörn Siser, Chairman and Senior Partner at global mid-market manager Actis. Actis has been investing across energy, digital, and new economy real estate in the world's growth markets for more than 20 years, or as Torbjörn likes to call them, most markets, given they represent over 85% of the world's population. We discuss why perception risk is still the main impediment to channeling more LP capital into these markets, why the current volatility does not change the immense need for critical infrastructure, how demand offers the strongest risk mitigation, which markets offer the best opportunities, and much more. Hi Torbjörn, welcome to the podcast. Great to be here, Bruno. So, we're at this moment in time when it feels like old notions are being turned on their head a bit. So, we have significant volatility originating from the US, which is a premier OECD market, and the kind of volatility that, rightly or wrongly, many people actually associate with some of the growth markets that Actis traditionally invests in. So, my first question to you is, are you seeing any change in mindset, particularly amongst LPs? I mean, it's clearly a topic
Speaker 2of the last couple of weeks, or many weeks, I guess, the whole, you know, volatility, and what does that mean for us as an investor, you know, both Actis, but also, you know, in the bigger picture. So, it's a big discussion, but I think one thing coming out of that is that there are uncertainties here, and we don't really know exactly where the tariffs will really land, but uncertainty, I think, then that drives the question of diversification. And then diversification, I would say, away from the US market or their dependence on that. And the other one is maybe having done more of infrastructure, which clearly has that stable contracted cash flow characteristics. And if you add the two of them, you know, going to the non-US, non-European markets where we are focusing in infrastructure, I think, actually, we are one of the great beneficiaries of this. So, this has been one of the key discussions with our LPs the last many weeks.
Speaker 1I guess the flip side of it is that, you know, in the last couple of weeks, we've had a lot of growth. I guess the flip side to this, if I'm playing a bit devil's advocate, is you put all of this volatility in the mix and all of this uncertainty, and then you get people thinking, well, actually, some of these growth markets may be more vulnerable to the current environment. And thus, you know, I'm already a little bit as an LP afraid of going into them, and now I'm even more afraid. So, I'm wondering if you're seeing some of that too.
Speaker 2Yeah, I mean, I would say no. And I think that if you're looking at it, yes, if you look at North-South trade, and that can have some implications clearly towards U.S. and European markets. But if you look at the South-South trade, I mean, there's no new tariffs between Brazil and China or between Mexico and India or, you know, so that trade, which has overtaken the North-South trade many years back and is growing much faster, that is stronger than ever. So, if you're looking at that for those markets with the non-U.S. and non-European ones, you know, most of the world, I would call it, you know, where 85% of the world population lives, I think trade and growth that underpins the need for critical infrastructure is growing more stable than ever.
Speaker 1Yeah. And in a way, I'm guessing that story is perhaps coming out to the forefront a bit more then. Exactly. Exactly. Okay. Torbjörn, you've been doing this for many, many years, and we've been sort of talking about the industry and how can capital move into these, growth markets, when traditionally it's always concentrated in the markets, the traditional OECD markets. Yeah. So, if I ask you now, in 2025, what is the main impediment or the main impediments to us seeing more infrastructure capital flowing to some of these markets? What's on the list?
Speaker 2Yeah. I mean, I think the number one is probably perception. Perception of risk versus real risk. But I think it's changing. I think that we see more capital coming to most of the world, so the non-U.S. and non-European markets. I think we then see more competitive capital coming, and we welcome that. I mean, we want more capital into these markets. So, I think then that the South-South trade and the fundamental growth that is happening there, and this is, you know, you build, produce, and consume critical infrastructure locally, is less dependent on, therefore, tariff discussions and the likes. And I think that simplistic view of where, therefore, fundamental investment needs are, I mean, people get it. And I think, therefore, the perception of risk is slowly changing, and I think more capital is coming into these markets.
Speaker 1On that note, actually, in terms of risk management, one tool that seems to be gaining in popularity is blended finance. And actually, I'm seeing it grow in popularity in a private fund, private capital context, actually, because it's obviously been around in other instruments for quite a while. But in this private fund context, what do you make of its growing use to channel investments into these markets?
Speaker 2I mean, in some ways, I mean, there are some markets, I think that that may be relevant, but where we invest, it's not needed. I mean, in my 30 plus years in this, or 35 years in investing, I've never seen a bankable deal not getting capital. So, I think it is some sort of a misunderstanding that you can solve everything by just having more capital flowing in. That's just not what is needed. There's plenty of capital, you know, available on the planet, and it will flow to the best risk return. When it's there. So, if you structure deals in the right way, capital is there. So, the question of getting capital to, you know, certain parts of the world, I'm not sure subsidy is the right tool, actually. I think it's much more making sure that you have the resources, you know, the people with the right competences to create, therefore, structures which are transparent, you know, without an uncertainty, and capital will flow. So, you cannot avoid that and then just flood it with subsidized capital. So, I don't think that is a solution. There might be some markets where you want to have some more aid money to flow in to get economies going, but clearly, you know, most of the world outside the US and Europe is a big place, and we are not in those markets. We are in markets where you have fundamental needs for infrastructure, and people are very happy to pay for it.
Speaker 1Yeah. Do you think there's a little bit of a, to go back to your earlier comment about perception as an impediment into doing business in these markets, is this almost a sometimes blended finance, a little bit of an expensive solve for the mind, a little bit of expensive reassurement then for people to just get comfortable?
Speaker 2That's my opinion, yes.
Speaker 1Okay. I also wanted to ask you this. At the time we're recording, you've actually just, the day before, you've just announced the close of your second long life infrastructure fund, and it's focused on operational assets, you know, in many of these markets. And I always thought that that is actually maybe a very good way of getting people comfortable with some of these markets, because you take some of the greenfield risk out of the equation. Here are these operating assets, they've got a track record and so on and so forth, and you're at your second time around. So I just want to ask you to share a bit how people are thinking about that product and whether you see further growth for similar products.
Speaker 2Yeah, I mean, you're right. If you're looking at, I mean, it's our second product. So the core of what we do, and you can say we are builders, we are builders and operators. We're building new infrastructure, you know, that gap of supply and demand for infrastructure, and therefore get that new capital to come in to actually create new infrastructure. That said, clearly over time, we've seen that there is now an installed base of existing infrastructure, where someone like us can come in and actually do quite a good job of improving existing cash flows, and therefore drive the returns up. And you're right, those type of investments, the perception of risk there is lower. Because I mean, they're already built and operating and, and cash flows are flowing. And I think here is a fantastic opportunity in the sense that, you know, this is core or core plus infrastructure where we can generate value add returns because of the mismatch between supply and demand of opportunities and supply and demand of capital. So it's clearly is a way of coming into these markets on a lower risk yielding proposition.
Speaker 1We are at a moment where everybody is focused on DPI, everybody is focused on exits. And so maybe for the listener that is less familiar with some of these markets, could you give an overview of your exit experience in some of these markets?
Speaker 2Yeah, I mean, if you look at the last 23 years here, and the various funds we had, I mean, we've done a total of 200 exits, so we clearly have an experience of exiting transactions. And I believe we are, you know, top quarter top desi in terms of getting DPI back to our investors. So I would say well structured transactions, you know, do have a real need for new, you know, GPS and others who want strategics who wants to come in and own these assets. So we haven't seen a lack of buyers, and therefore a issue with exits really. And that probably comes from that, you know, more capital coming into our markets. And therefore, there is an inflow. And if there is therefore, should we say a shortage of quality assets that someone like us have built, clearly, we can then, you know, sell that in a pretty good way into that demand for assets that we created.
Speaker 1And that's actually that was going to be my next question. So I'm just going to into it but that the people or the institutions you exit to surely you've seen a change over the years right precisely because you now have let's call it some of the more traditional blue chip managers also going into these markets so how would you peg the evolution of the capital you now exit to yeah i
Speaker 2mean we've seen a broader group of you know exit routes that they know that we could like an exit to so if you go back some 20 years back i mean i think it were clearly strategics and there were global strategics in the in the power space as we are focusing on on power specifically over time we saw regional power companies and regional strategies come in as exit routes and i think it's the latest is that we have funds big infrastructure funds interested in our markets and the assets that we are creating and the building companies that we are building so yes it's been a shift and i think that that just gets us a you know the broader set of potential ways of exiting you know
Speaker 1when it comes to infrastructure as an asset class we talk a lot about the sanctity of contracts even though there's been significant volatility in oecd regulated assets you often make the point as you've done here already that there's a supply demand gap that exists in growth markets that kind of works as the best risk mitigation you could ever have and so i'm just wondering again for people less familiar with these markets maybe you can just explain a bit better what you mean by this yeah i mean i have a lot of experience with
Speaker 2this yeah i mean i think that supply and demand drives everything in life in many ways right it drives risk it drives returns risk return and the like so if you're looking at the non-us and non-european markets that's where you have 85 percent of the world population that's because of demographics urbanization and the likes and economic growth i mean you have some 90 percent of economic growth going forward in those markets and two-thirds were actually about 70 percent of all needs and opportunities in infrastructure and that's where we're at right now and that's where and empower specifically is in these markets the non-us and non-european markets but at the same time you know the majority of the capital two-thirds give or take is focusing on you know bidding each other up in u.s and europe so to be in markets where two-thirds of the opportunities are and only one-third of the capital chasing it that creates a absolute fantastic risk return prospect where you are and i also think that drives the fundamental risk because if you have a product that you know everyone wants it's in a short supply electricity as a critical infrastructure in a country you know people will pay you for that and if they don't need the product if there's an oversupply of electricity first at that time will people start looking at contracts do i need really need to and how about this and that and yes i need to deliver you know now renewable energy into an oversupply german market or what have you right but that just doesn't happen if you have a shortage of the product you're selling so i think that mismatch between supply and demand opportunity and capital is fundamental in looking at risk analysis and i think it's much more important in every project that we look at than you know the contract of course we look at you know the contracts and that they're there and that we have the you know the legal structure and so on around it but fundamentally is to have a product that people really really
Speaker 1want yeah and do you feel that need in a way sort of insulates against let's say major contractual changes or major ups and downs so to speak
Speaker 2yeah no i really do i think that you know again if you have a client who is very keen to get your product they will pay they will not look at the contract and saying that i mean of course they will follow the contract but they're very keen to have a relationship with you where you provide that critical infrastructure and they pay for it they are in desperate need of it and that is always the best risk mitigate we're
Speaker 1likely entering in into a period of let's call it prolonged inflation and even though we're in a period where we're in a period where we're in a period where we're in a period where we're in a period where we're in a period where we're in a period where we're inflation hedging capabilities i think there's always a question of affordability once inflation is sticky and it's constantly there so all of what you've been saying makes a lot of sense and it's true about how demand is strong and and thus what you build is needed but i'm wondering how you're thinking about persistent inflation and affordability is a key concern because i'm guessing that in some of these markets affordability is more front of mind perhaps than in some of the other ones i mean you know the
Speaker 2whole most of world universe non-us and europe is clearly not just one uniform markets it's very different markets in there so it can be different pictures in different parts of the world but if we're looking at specifically the affordability question you can say the most expensive power is no power so if you don't have reliable power that is the most costly of everything right so i think therefore the willingness to then pay for critical infrastructure and specifically electricity you know it's there because it it is more expensive not to have it yeah
Speaker 1that makes sense and for be honest you've mentioned you know being builders several times here so again in this particular period with some of the again the increased costs and the supply chain disruption we've had for a while and it's likely getting worse how are you as a builder being affected how are costs for your projects changing increasing talk us a little bit through that yeah i
Speaker 2mean i think that you know you can say you have a deglobalization that you're referring to there and you can say the tariffs has a negative impact in general of growth however you're looking at these economies again you know if you're in southeast asia and you have six seven eight percent you know economic growth set there are local growth activities happening there they need critical infrastructure and again as i said we build and you know you use and consume electricity and you know you have to have a lot of electricity and critical infrastructure locally so it's a very local activity from that point of view then you can say are the global supply chains are they changing a little bit yeah i mean some of them are but i think that there's more the global epc supply so then deliver you know the power plants and the likes you know they will then localize their production so i see a very positive picture nevertheless here in terms of the need for critical infrastructure in the markets where we where we invest
Speaker 1and And it's true, when you tend to talk about growth markets, you know, sometimes you make this mistake of talking about it as a, you know, rest of the world type of thing. You're in a pretty good position to actually take us on a little bit of a tour here. And so, again, for listeners that may be less familiar, tell us in which regions you are seeing the most opportunities and also across which sectors.
Speaker 2Thank you. Yeah. So growth markets, or I'd like to call it most markets, because that's where. Most markets is probably more accurate. So if you're looking at it, I mean, clearly, Latin America has been an area where we invested significantly in the past, and we see lots and lots of opportunities there. If you then, you know, move Eastern Europe, where you have both, you know, a need for energy and also energy security coming in there as an important element in that whole area. India. India has been one of our success stories, and that is just continuing, you know, forward big, big, big time. The need and the structure in that market. The market is also very attractive to us as investors, and I would say Southeast Asia. So we're doing a number of things here in Southeast Asia lately. So it's really across the globe. And if you look at the sectors, I mean, our focus is number one is electricity and power. The other one is digital. And I think that if you're looking at digital and power, they somehow come together a little bit over time here now. Because if you look at, say, data centers, I mean, the need for electricity there is very significant. That need, you know, is more and more also for green energy. And if you then are a leader in the electricity space, in our markets, and you therefore know and understand how you actually can secure that power to those data centers and to that digital side of the infrastructure space, I think that can unlock that significantly. So those are the two main focuses that we have. You mentioned our Long Life Infra fund that we just announced yesterday. That is a yielding proposition. And in that yielding proposition, there is a long life infrastructure. And in that yielding proposition, there we are a bit broader also into district cooling and roads and the like. So a bit broader in that space. But on the, where we really build things and there is a capital gain type of a strategy, that is electricity, power, and digital.
Speaker 1And one, let's pause on maybe digital and, well, you just mentioned that the intersection with power is completely there these days. But if we talk about digital data centers in particular, which is kind of the hot topic of the day, again, I'll let you talk about that. But if you choose which markets may yield more interesting examples, but considering grid development in some of the places you do business in, I'm just wondering what trends you're seeing. Are you doing a lot of co-location when you are doing data centers in these countries or microgrids even? I'm just wondering how you're going about it.
Speaker 2Yeah. I mean, I think that first of all, I mean, the need is very, very significant. And the penetration of data centers nowhere near what you have in Europe and U.S. And therefore, the price points are completely different, right? So. It's a very attractive space to invest. I think one trend we've seen lately is then the AI coming into the picture. Because if you then do cloud and cloud, which is still a big, big, the majority of the investment need. But there you have the sovereign elements. You want to have your data in various countries and the likes. But with AI and machine learning, where you actually then can process in a different place, you will have more clusters of where you can then build the data centers that will serve other countries. In some sort of a bigger concentration, I think that is a trend that we probably see globally. see that in our markets and then and that creates opportunities then you know in areas where you can then put these data centers where you have abundance of renewable energy specifically and if you're looking at in in the markets here that we talk about most of the world in general the wind is blowing more the sun is shining more so for the same solar panel or for the same wind turbine you get more kilowatt hours out of it the capital cost is the same so therefore the cost picture is also lower so if you can co-locate them and in a strategic way get there for digital infrastructure to places and locations where you have affordable reliable renewable energy i think that is a win-win and
Speaker 1just in terms of your strategy um you've had i think a lot of success building scaling platforms most recently as we were just mentioning a while ago you then kind of end up selling to other managers for example like say your your gips and i'm just wondering if this is going to continue to be the central plank of how you do business and i want to also ask you how you're thinking about that as actus grows going forward so will you still be active in this mid-market space do you intend to grow into say the large cap space what is on your mind yeah i
Speaker 2think the most important word you use there is mid-market so we consider ourselves being mid-market and we had our annual investor conference here in march and there was a discussion about this mid-market and what mid-market actually means and some our lps and said mid-market trust means you can actually exit and i think therefore that i think that is a is a good way of thinking about this right because if you have a size and scale where you can then exit there are other strategic exits you can do but you can also exit into the very large cap mega funds you are mid-market and then you have additional exit routes in there and that's clearly a space where we want to stay and where we want to be and we want to make sure therefore that we can leverage on being builders and operators and the local knowledge in our markets to unlock those opportunities plug those supply demand gap and create infrastructure and then you know the very large infra funds can be a potential exit route for it so that is really mid-market so we're not going to move away from that space
Speaker 1okay and in terms of how you're thinking about new strategies we've spoken about the long life fund too you just closed you have your traditional strategies what other strands are you thinking about things that you maybe are not doing or specialized strategies i mean i think in general
Speaker 2there's more of the same so same market same strategy same people same return type thing but if you're looking at we have our capital gain focuses on the power side and on the digital side and then we have a yielding proposition where we are broader so that that's where we are and that's where we are staying and i think we see you know a very significant opportunity there and clearly we were going to grow with the market but i think it's very important therefore that we don't as we've talked about not growing into scale and size so that you limit the exit opportunities because clearly when we do an investment the first thing we focus on who is going to buy this five seven years from now what is the characteristics of this company that we're building the growth diversification the scale of it and important the scale of it so that we're thinking about the growth of it and the scale of it so that we're thinking about therefore that it fits into another portfolio or another strategics so with that in mind clearly there is growth and there is opportunities but we always want to make sure that we're not growing too fast so we're not coming out of that sweet spot that we've been in the last 23 years that
Speaker 1makes sense and one final question for you then it's i think going on a year since general atlantic's acquisition of actors closed which i think it was last october so what's changed for you or what hasn't changed changed also for actors over this year and how are you integrating with general atlantic going forward
Speaker 2yeah i mean so far so good they're not in a great experience so if you're looking at it in some simplistic terms it's really business as usual but stronger so being part of a larger platform we then do the infrastructure and then we'll have credit then we have the growth equity leveraging on one common platform which means that we can offer our investors a variety of risk return products and we can have an ongoing discussion with them so we have some product that we can talk about and we can be therefore more strategic to them and i think the interface between gps and lps is moving towards being much more of a partnership i mean that p is becoming much more relevant here and become much more of a partnership when you then have a variety of solutions that you can offer to be a solutions provider rather than i don't know the extreme would be that you're one trick pony and you're selling one product and that product is of course a solution to everything in that case right so but you know if you then have that broader view how you get closer and much more strategic to our lps and i think we can see that i mean from the response from the lp so far so so far so good and then you know here we are that's one ga so to say i think that's
Speaker 1a great note to end on uh torbjorn thanks very much for for being with us today and thanks for your time thank you for having me that again was torbjorn caesar chairman and senior partner at actus to hear more of our episodes head over to infrastructureinvestor.com forward slash podcast or you can search and subscribe to the infrastructure investor podcast wherever you like to listen
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