Stonepeak's Luke Taylor - what it takes to be a great infrastructure investor

Welcome back to the Alt Goes Mainstream podcast. Today’s episode dives into the evolution of infrastructure investing with the leading scaled specialist firm in infrastructure. We sat down in Stonepeak’s Hudson Yards office with the firm’s Co-President Luke Taylor to discuss the inner workings of the infrastructure investing world and unpack the story of how Stonepeak’s rapid ascent has seen the firm climb to $76.3B in AUM in 14 short years. Luke brings a wealth of experience to the infrastructure investing world. He is Co-President of Stonepeak and a member of all of the firm’s investment committees. He’s been investing in infrastructure for over 20 years, joining Stonepeak from infrastructure investing pioneer Macquarie Capital. Luke and I had a fascinating and thought-provoking discussion about infrastructure investing and why it’s becoming an increasingly important part of the private capital ecosystem. We covered:How Luke went from growing up on a sheep farm to investing in infrastructure in New York.What Macquarie taught him about how to approach infrastructure investing.Why he took the entrepreneurial leap to build Stonepeak and join Chairman, CEO, and Co-Founder Mike Dorrell from the firm’s earliest days.Why infrastructure investing is more than toll roads, airports, and bridges.How there are elements of a private equity approach to investing in, building, and operating infrastructure assets.Where infrastructure fits in an investors’ portfolio.Why individual investors should consider exposure to infrastructure assets.Has infrastructure proved itself through an inflation cycle?Why scale matters in infrastructure investing.How Stonepeak identified investing in data centers early on and well before the data center boom began.What type of demeanor and mindset makes for a successful infrastructure investor. Thanks Luke for coming on the show to share your expertise, wisdom, and passion for infrastructure investing. A word from AGM podcast sponsor, Ultimus Fund Solutions This episode of Alt Goes Mainstream is brought to you by Ultimus Fund Solutions, a leading full-service fund administrator for asset managers in private and public markets. As private markets continue to move into the mainstream, the industry requires infrastructure solutions that help funds and investors keep pace. In an increasingly sophisticated financial marketplace, investment managers must navigate a growing array of challenges: elaborate fund structures, specialized strategies, evolving compliance requirements, a growing need for sophisticated reporting, and intensifying demands for transparency. To assist with these challenging opportunities, more and more fund sponsors and asset managers are turning to Ultimus, a leading service provider that blends high tech and high touch in unique and customized fund administration and middle office solutions for a diverse and growing universe of over 450 clients and 1,800 funds, representing $500 billion assets under administration, all handled by a team of over 1,000 professionals. Ultimus offers a wide range of capabilities across registered funds, private funds and public plans, as well as outsourced middle office services. Delivering operational excellence, Ultimus helps firms manage the ever-changing regulatory environment while meeting the needs of their institutional and retail investors. Ultimus provides comprehensive operational support and fund governance services to help managers successfully launch retail alternative products. Visit www.ultimusfundsolutions.com to learn more about Ultimus’ technology enhanced services and solutions or contact Ultimus Executive Vice President of Business Development Gary Harris on email at gharris@ultimusfundsolutions.com. We thank Ultimus for their support of alts going mainstream. Show Notes 00:00 Introduction and Sponsor Message 01:18 Podcast Opening and Theme 01:55 Episode Overview: Infrastructure Investing 02:04 Guest Introduction: Luke Taylor 02:45 Luke Taylor's Background and Journey 04:49 Early Days at Macquarie 07:19 Transition to Stonepeak 08:04 Building Stonepeak  10:13 Value Creation in Infrastructure 11:59 Mindset of an Infrastructure Investor 13:08 Balancing Long-Term and Agile Thinking 15:42 Key Drivers of Value Creation 16:10 Underwriting and Risk Management 18:00 Operational Intensity and Asset Utilization 21:51 Network Effects in Infrastructure 23:19 Infrastructure as a Defensive Investment 26:13 Portfolio Construction and Infrastructure 26:39 Private Infrastructure and Yield Benefits 27:29 Productizing Infrastructure Investments 27:41 Equity, Credit, and Real Estate Strategies 29:23 Thematic and Opportunistic Investing 29:53 Data Centers and Early Investments 30:06 Identifying Investment Opportunities 30:14 Evolution of Data Centers 30:58 Interconnection Hubs and Carrier Hotels 31:32 AI Boom and Data Centers 33:22 Investing in AI Through Infrastructure 34:42 Underwriting AI Thematics 35:04 Capital Needs in Data Centers 35:32 Downside Protection in AI Investments 36:49 Navigating Increased Capital in Infrastructure 37:35 Durability of Cash Flow in Infrastructure 38:40 Scaling Stonepeak's Infrastructure Investments 39:18 Diversification in Infrastructure Investments 41:47 Developing an Edge in Origination 42:36 Structural Elements in Deal Sourcing 42:57 Competition and Market Structure 43:26 New Entrants in Infrastructure 43:44 Building New Assets in Infrastructure 43:54 Exits and Evergreen Funds 46:27 Private Wealth and Infrastructure 51:25 Challenges in Starting a Wealth Business 51:51 Deal Flow and Product Construction 53:50 Volatile Markets and Opportunities 54:20 Interest Rate Risks in Infrastructure 55:18 Favorite Infrastructure Opportunities 57:01 Closing Thoughts and Full Circle Editing and post-production work for this episode was provided by The Podcast Consultant.