Research and Insights
How to Be an Infrastructure Leader, Not a Laggard
Asset managers are at risk of being left behind if they don’t update their approach to data.
Infrastructure managers are set for a boom in investor allocations, but they risk being left behind by disparate systems and outdated manual processes. A single data platform can deliver automation, speed and cost efficiency.
Institutional investors are expected to increase their allocations to infrastructure in the next few years as they search for attractive yields, diversification benefits and inflation protection.
Our research Private Markets: A Silent Revolution found that while asset owners globally had just 3.1 percent of their assets in infrastructure in 2021, more than half expect this to increase in the next three to five years.
However, outdated data systems and associated reporting could hold managers back from tapping into this future growth. Our research found that almost seven in 10 private fund managers still use ‘siloed’ data reports, in formats such as PDFs or Excel spreadsheets.
Such an outdated approach to data is inadequate for infrastructure assets, where it is often very difficult to make an apples-to-apples comparison. Each airport, toll road, solar or hydro project has its own unique due diligence, underwriting, operational expenditure and performance metrics, which makes aggregating data challenging.
For example, the sub-sector of renewable energy is particularly complex, presents many data points for consideration and exhibits extreme volatility. Within a single portfolio, there can be vast amounts of unstructured data and documents, making it challenging to create a consolidated view.
Forecasting future cash flows requires precision. Therefore, the importance of capturing hourly and granular information is critical both when considering buying an infrastructure asset and managing it. For example, it is important to capture production data for each of the 8,760 hours in a year to accurately forecast the annual output of a windfarm. A slight adjustment in production can have a significant impact on the overall net asset value of a project.
Some managers have invested in an array of point solutions to help solve their data challenges. Funds may end up with 25 separate point solutions, and no way to connect all the data on one platform. It can take managers up to three weeks to make simple assumption changes.
By spending time on data collection and processing, managers risk losing the opportunity to react quickly to markets.
However, managers still need to connect into the powerful, bespoke valuation models because each asset has unique attributes.
But most technology providers neglect these financial models that managers have worked so hard to create. Without a solution to connect bespoke models, managers would need to manually transfer some data – which could result in huge errors.
They require a platform that can help them connect to these models in a much more efficient way.
A Single Data Platform
Using its proprietary ModelSync technology, State Street AlphaSM for Private Markets can connect all bespoke financial models, leave them in their original Excel format, and then leverage the data for consolidated outputs and insights. For example, asset owners and managers can audit and leverage data to forecast future cash flows of infrastructure assets, portfolios and funds.
Having faster access to deal with pipeline management data enables managers to respond to investor inquiries much more quickly and to confidently venture into new asset classes with scale and flexibility.
By freeing up more time to spend on analysis and less on data collection, infrastructure managers can make better investment decisions, gain a competitive advantage and ultimately improve client outcomes.