Pantheon: ‘Infra secondaries is becoming a core allocation for investors’

**Bruno Alves** (0:02)
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 Andrea Echberg, Global Head of Pantheon's Infrastructure Team. Andrea is a veteran of the infrastructure secondaries market, and we talk about its evolution from a niche strategy into a core part of institutional portfolios. The discussion explores the impact of higher interest rates and liquidity constraints on deal activity, why investor appetite for infrastructure secondaries continues to grow, and how pricing, fundraising, and competition are shaping the market. We also touch on what Andrea called the good, the bad, and the ugly of continuation vehicles. The opportunities created by long-term themes such as digital infrastructure and the energy transition, non-GP sources of assets, and what the next phase of growth could look like as the market becomes increasingly institutionalized.
Hi, Andrea, welcome to the podcast.

**Andrea Echberg** (1:07)
Hi, Bruno, great to be here. How are you?

**Bruno Alves** (1:10)
I'm good.
So I feel that secondaries have gone through a bit of a step change over the past few years, going maybe from being somewhat esoteric corner of private markets to an ever more mainstream, popular liquidity management tool. And some of this feels like it's been the consequence of some of the macro changes and liquidity challenges that we've had, but you've been in this space for many, many years. So my first question to you is, has there been a tipping point? Was this always going to happen? How do you see it?

**Andrea Echberg** (1:44)
Yes, yes, Bruno. We've been in this market since 2010 The initial market was very much buoyed by the post-GFC problems that we saw within some of the infrastructure funds. Following that, the market has been quite slow. We've been able to find interesting deal flow, but there was a long decade in the 2010s that was quite slow. We were always confident that this market was going to come. The secondary market is a derivative of the primary fundraising market. Infrastructure is a more nascent asset class, but it's had very, very strong year-on-year growth, 10 percent CAGR over the last 10 years. So it's inevitable that a functioning secondary market is going to be needed. And we look at what's happened in PE and we were confident it was going to come.
Was there a tipping point? Absolutely, there was. So the fundamentals were there. The market had got to a size of 1.3 trillion of unrealized value. But the tipping point was absolutely coming from the change of rate environment that followed the OECD inflation and obviously the actions of the central banks. The initial reaction to that was obviously public market declines, denominator effect that pushed forward a lot of very motivated sellers. And then we've seen an on-going period of tight liquidity. MLA markets, exit markets have been very slow across private markets and infrastructure being no exception. And that's really precipitated a very significant increase in LP state deal flow. And I think to kind of put this in context, obviously the rate change happened in 2021
The deal flow that we logged in 2020, which was a low point, was really 14 billion of deal flow we logged. The last couple of years, it's been in excess of 50 billion.
So a huge hockey stick of opportunity and really what's just been a very, very attractive market to invest into.

**Bruno Alves** (3:41)
If we zoom out then a bit across asset classes, where does infrastructure rank in terms of popularity in the secondaries world nowadays?

**Andrea Echberg** (3:51)
Yeah. I mean, look, as I said, infrastructure is a more nascent asset class. It's rapidly growing. It's a very popular asset class for investors who are really looking, particularly in the volatile geopolitical macro environment we're in today, looking at the defensive characteristics, the inflation protection, the downside protection. So infrastructure is very, very popular, but it is a smaller part of private markets. And so I think to put the context around secondaries, the broader secondary market is around 230 billion per annum of deal flow. Infrastructure last year, according to the intermediaries, was somewhere in the 25 to 30 billion. So a little bit more than 10, a little bit less than 15 percent of the overall secondary market, but definitely a growing part of that market.
Yeah.

**Bruno Alves** (4:44)
And also one of the things that seems to be jumping out at us in terms of infrastructure secondaries is that they tend to command high average pricing, or that is what we hear. But I wanted to ask you, what does that look like on the ground in reality? Is that still holding up?

**Andrea Echberg** (5:03)