City exclusive: Cordiant Capital’s co-CEO on how to make money in the crowded world of digital infrastructure
Amid an increased focus on digital infrastructure, data transfers and online storage in practically every market around the world, investment giant Cordiant Capital listed its Cordian Digital Infrastructure arm in London last year.
Time for Morning Wire to catch up with Benn Mikula, co-CEO and managing partner at Cordiant Capital, to see how things are going and to discuss what 2022 so far had in store for the global investment firm.
Cordiant is betting heavily on sector-focused digital infrastructure and real assets, with the Cordiant Digital IPO a key part of that. Why do you zoom in on this crowded space?
The CORD IPO was a major step for us, and we will be following this with a specialist European renewable infrastructure vehicle focused on underserved markets as well as another global agriculture vehicle. Cordiant’s partners, none of whom had worked at Cordiant before, but having worked together previously, elsewhere, purchased the business from majority shareholder Ontario Teachers’ Pension Plan in 2015-16.
So how is it going?
We listed Cordiant Digital Infrastructure in London in February and, on the back or robust pipeline, did a follow-on over the Summer. CORD invests principally in cash-flowing platforms with expansion potential in the UK, Europe and North America, principally data centres, mobile and broadcast towers and fibreoptic. We expect the secular growth in this sector to persist for at least a decade.
After fixing performance in its emerging markets funds, we pivoted the business to become a specialist global investor backing middle-market companies seeking growth capital in digital infrastructure, renewable infrastructure and agriculture. This meant shifting focus to developed markets and global mandates, though we also continue to run some emerging market funds. We now have just shy of $3bn of committed capital in funds we manage, about triple the amount in 2016.
Digital Infra and energy are obviously on the radar of many investors. How do you focus on these areas?
Our three focus sectors benefit from enduring growth tailwinds: the fast-growing Internet economy in digital infrastructure, the move to Net Zero in renewables and the world’s growing population (and need for sustainability) in agriculture.
In each sector the game has a while to run. Each sector also has inherently positive impact investing benefits. Each sector tends to offer attractive characteristics around asset value and long-term contracts, but specialist industry knowledge is definitely a requirement to avoid mistakes.
“Digital infrastructure assets drive value growth through recurring contracts, often long-term, and barriers to entry.”
Benn Mikula, co-CEO of Cordiant Capital
Where do you see the most growth?
Europe is currently lagging the US and China in terms of digital infrastructure, so our first deal was in the Czech Republic: a country with GDP as high as Spain or Italy. CRA, the leading independent digital infrastructure platform in the country, combines towers, strategic data centres, nationwide fibre and a wireless network for major utilities. The large and growing pipeline in digital is broadly based across Europe and North America.
In renewables we are looking to offer something different to the several fine UK-focused platforms. We see more yield and more return in focusing on opportunities in under-served markets in Europe.
We also focus on greening the digital economy, not just looking at reducing the consumption of electricity at data centres, but in adding renewable energy to the mix and examining the whole-network use of electricity (for example looking at how integrating broadcast into 5G could save telcos on cost whilst making a serious cut in electricity requirements).
One of your other areas of focus is agriculture. Why?
For better or worse, the world’s population continues to grow even as the planet has to confront the implications of climate change. Common sense dictates that we cannot destroy sensitive biomes such as the Amazonia rainforest merely to grow crops, so we have to make the agriculture sector better, smarter and more sustainable.
Our franchise focuses on three things: providing the critical finance to enable delivery of crops to global blue chips such as ADM, Wal Mart and Tesco, improving yields through the use of precision agriculture drip feed irrigation, satellite monitoring and other tools and combine this set of tools to also ensure enhanced sustainability and meeting or exceeding relevant environmental laws.
Drip feed irrigation, for example, can significantly boost yields (feeding more people per hectare) and reduce costs (financial and environmental) even as it slashes the amount of fertiliser, herbicide and water required.
Tell us a bit more about the culture and the values of Cordiant Capital.
We capitalise on our deep sector knowledge and wide-ranging operational experience in every investment we make. Whilst we may invest in new generations of infrastructure and real assets, we ensure alignment with the interests of our investors through some very old-fashioned values. Senior decision-makers are partners of the firm and managing our clients’ money is not a job for us: we are invested reputationally and financially in the firm.
Finally, what does the future look like?
In some ways we are a simple firm focused on three vast sectors filled with opportunity: digital, renewables and agriculture. We will emphasise growing the firm by capturing these opportunities for investors, largely within our middle-market, growth capital orientation.
More specifically, we are looking to complement Cordiant Digital – a ‘core infrastructure” strategy’ – with a more classic “value added” digital fund focused on Europe and North America. This will be structured as a classic GP/LP fund and be aimed institutional investors.
We will also be launching a European Renewable Infrastructure Equity Opportunities, anchored by several hundred MW of producing assets, and a follow-on Global Agriculture Equity Fund.
Looking ahead to later in 2022, we expect to reload our global, sector-focused credit fund. On the investing side our pipeline is large and active and are looking forward to deploying further funds for CORD in the near future.