Ardian: ‘We’ve been less shy on factoring growth into our business plans’

Bruno Alves (0:04)

Hi, I'm Bruno Alves, Editor-in-Chief of Infrastructure Investor, and welcome to the Infrastructure Investor Podcast. In today's episode, I sit down with Marion Calcine, Chief Investment Officer at Ardian Infrastructure.

We've been hearing a lot about investors' newfound interest in Europe. Ardian, of course, raised one of the largest ever Europe-focused funds last year. So we spent a good chunk of our discussion dissecting the European investment opportunity, what is attracting our piece to it, and how the assets on offer differ from the North American market. Given Marion's role as CIO, we also delve into portfolio construction. What Ardian sees as a central infrastructure, why it feels comfortable factoring more growth into its business plans these days, and the role of technology in portfolio management. Finally, we touch on AI infrastructure, how Ardian is approaching this huge investment opportunity, its thoughts on AI sovereignty, and much more.

Hi Marion, welcome to the podcast.

Marion Calcine (1:14)

Hi Bruno, thank you for having me.

Bruno Alves (1:17)

So we've been hearing much in recent months, certainly this year, maybe a little bit last year also, about Europe's growing popularity with LPs.

And obviously, Ardian came off the road not that long ago, and you closed your biggest ever infrastructure fund, which has a strong focus on Europe. And I guess I wanted to start by asking you, did you notice this effect while you were fundraising? And do you think there was really more LP interests in Europe compared to, you know, previous vintages?

Marion Calcine (1:55)

Yes, definitely. The final close of our European Fund 6 is a clear evidence of the interest from LPs in European infrastructure. The fund closed at its hard cap. It closed more than 90% above Fund 5

Including co-investments, it created a $20 billion platform focused predominantly on European assets across energy, transportation and digital infrastructure. And this fundraise demonstrated the growing demand for European infrastructure, really. 35% of the commitments came from clients new to Ardian. Approximately 60% of the capital came from non-European LPs. And for the first time, US LPs are the largest country in our investor base.

Many investors have become over-allocated to the US because US public markets have done so well, right? And they are not going to sell their US assets, but they are now looking to invest more in Europe, to diversify their portfolios. And when you look across Europe, the public markets are less attractive than in the US, so people are looking at private markets. That, once again, plays to Ardian strengths.

Bruno Alves (3:14)

Yeah. So you've actually listed a few reasons about this renewed interest. So on the US side, overexposure to public markets needing to diversify, to rebalance, and also the comparatively cheaper nature of assets in public markets in Europe. I just want to ask you also what else might be driving this renewed wave of interest, and if there are other reasons for other LPs from other parts of the world, say from APAC or from the Middle East, for example.

Marion Calcine (3:47)

Yes, there are several factors. European infrastructure first has really demonstrated resilience in an environment which is characterized by higher inflation and higher interest rates. In Europe, you have motorway tariffs, and you have also regulated asset base of airports, which are typically linked to CPI. In the US, revenues are more commonly linked to fixed escalators. So in periods of high inflation, European infrastructure can be more closely correlated with inflation. Our European portfolio, for instance, has more than 85 percent of its revenues, which are linked to CPI.

Also today, and I guess we will discuss that further, Europe has such a big need of investment into energy security and digitalization that it makes it very, very appealing to investors.

M&A-wise, there are more deals in Europe than in the US, and also in volumes, this is true.

You had over the last 10 years, 1,000 deals in Europe. You had only 700 in the US.

On top of that, the deal flow that you find in Europe is very, very different from what you can find in the Americas. There are lots of transportation subsectors in Europe, whereas in the US, you have fewer toll roads, and no airports that really private capital can invest in. But on the other side, the car parks dynamics in the US are more favorable than in Europe. In telecoms, you have totally different setups in Europe and in the Americas. The US has only three national carriers, whereas in Europe, you have 40 So there is more consolidation to come in Europe, but there are stronger counter parties to infrastructure operators in the US. So all in all, very, very different deal flow characteristics. But don't get me wrong, European infrastructure today attracts more capital than ever before, but American infrastructure remains attractive as well. We are finishing the investment period of our American mid-cap fund, which has a balanced investor base across continents. And our large cap fund is predominantly European for sure, but it can invest up to 20% in the Americas. So, all in all, more investment needs for sovereignty purposes in Europe, more growth in the US, different but complementary deal flows. This is why we invest really on both sides of the Atlantic. And we try to apply the same definitions and the same set of rules anywhere and everywhere we invest.