Just over a decade ago, infrastructure funds were a relatively straightforward proposition. They focused on operational assets with predictable cashflows, with investors expecting little more than performance reports every now and then. Fast-forward to today, and with investors pouring capital into power networks, transport systems and digital infrastructure, the industry looks very different – as does the role of the funds’ CFOs.
Infrastructure fund CFOs now face a mix of more complex investments, growing portfolios across several funds, closer investor scrutiny, increasingly liquid fund structures and rising regulatory demands.
‘Investors want to actively measure the fund manager’s effectiveness’
‘The infrastructure fund CFO role is expanding,’ says Chester Dawes, CFO of Vision Ridge Partners, a US investment firm focused on global sustainable real assets. ‘You’re expected to do a lot more.’ For example, simply reporting a portfolio company’s fair value is no longer sufficient. ‘Now, investors want to see the entry EBITDA, ongoing metrics, revenue, debt and so on to actively measure whether the GP enhanced the business operationally or relied on financial engineering.’
Sustainability reporting, particularly for European investors, adds a further layer of data collection and analysis. ‘In the past five years, there has been an explosion in the amount of detailed reporting that you need to do under the European Union’s Sustainable Finance Disclosures Regulation,’ says Peter Blackburn FCCA, director for infrastructure at fund administration outsourcing specialist Aztec Group.
Valuations have also become more frequent as managers launch open-ended or listed funds to raise capital from individual as well as institutional investors. ‘Historically, infrastructure funds had annual third-party valuation reviews,’ says Mathias Schumacher, UK valuation advisory services leader at consultancy Kroll. ‘Now, we’re engaged more like semi-annually, quarterly or even monthly. This all lands up with the CFO, who must manage more workflow, co-ordinating between independent parties, portfolio companies, deal teams and investors.’
Leadership
The skills that infrastructure CFOs need are therefore shifting, much as they are for finance leaders across the board. Increasingly, CFOs are expected to contribute commercially and strategically, says Dylan Rosser, vice president for finance and data at UK-based Private Equity Recruitment.
‘The CFO is the bridge between the fund, the assets and the investors’
Fundraising is a prime example. ‘Previously, a CFO might have delivered the information for the fundraising process,’ Rosser says. ‘Now, CFOs are much more likely to be presenting to limited partner investors. They have to be able to articulate the information to a wide range of investors across a global platform.’
Dawes describes today’s CFO as the ‘glue’ that holds a fund together. ‘I talk to different bankers and our investors all the time. It’s not about being an accountant in the back room – it’s all about people and relationships. You’re expected to be a business leader and in front of situations that matter most.’
The greenfield evolution
Much of this holds true for CFOs across all private market funds. Yet infrastructure is becoming still more complex. The rise of greenfield investments, such as renewable energy and datacentre developments, brings potential for delays, cost overruns, construction risk, regulatory approvals and shifting political priorities, all on top of back-ended cashflows.
Emmanuel Rotat, partner and global CFO at Paris-based greenfield infrastructure specialist Meridiam, believes his background in engineering and on investment teams is critical to his role. That experience means he is ‘fully integrated into the firm’s different activities to drive value across the business’.
He explains: ‘CFOs need to understand the intricacies of greenfield investments. That includes the risks, the investment and development processes, and project finance, which is quite specific. Importantly, you need to speak the same language as a variety of teams to be the bridge between the fund, the assets and the investors.’
‘A background in project finance and asset-level modelling is needed’
Meanwhile, operational experience in manufacturing has proved vital for Dawes. ‘Greenfield investments are very different from buying an existing company and assets,’ he says.
‘It’s not as easy as writing one big cheque and monitoring the investment. They are funded in stages. You have to know what approvals are needed, think about perhaps bringing in joint venture partners and really understand capital markets, project finance, securitisations. You may need to hedge if there’s an international component – how will that impact the company’s balance sheet and your fund’s exposure? Overall, you need the capital markets view, strategic mindset and an eye for operational detail.’
Firms targeting greenfield investments are therefore looking further afield for more specialist experience when hiring CFOs. ‘There are so many nuances in infrastructure these days,’ says Kylie Hart, co-founder and manging partner at US-based recruitment consultancy Norgay Partners. ‘From digital and renewables to midstream oil and gas – the asset types are so different. Having a background in project finance and being able to do asset-level modelling might not have been on the list before, but they are today.’
Enter AI
Of course, CFOs are increasingly deploying AI to improve finance teams’ efficiency. Yet even here, CFOs are called on to shape the way firms use these tools. Rotat, whose remit also includes Meridiam’s IT, explains: ‘AI can help manage rising volumes of reporting and regulations. But it requires teams to adapt. It’s a big change. You have to invest in the technology, but you also have to invest in training people. It’s as much about change management as anything else.’
As their brief expands, CFOs have become the linchpin of infrastructure firms, with responsibilities spanning ever-more detailed reporting, investor communication, co-ordination with bankers, portfolio companies and investment teams, and AI adoption. ‘A fund CFO’s role is far more interesting now,’ Blackburn says. ‘There’s so much nuance – and that makes it so much more rewarding.’
More information
Visit the ACCA Careers jobs board to browse through a wide range of ACCA CFO vacancies, find your ideal job and apply online.
