It’s the early 1990s. Michael Jordan is just getting into his stride with the Chicago Bulls. Microsoft and Apple are still competing for dominance of the PC market. And grunge rock – a la Nirvana and Soundgarden – is dominating the Billboards along with its trademarks of flannel and torn denim.
Meanwhile, there’s a new asset class being pitched to institutional investors called infrastructure” that is characterized by capital-intensive, physical assets in high-barrier-to-entry industries that provide essential services to society and critical, global supply chains. The believers are saying that performance should be stable and attractive since the assets are typically tied to long-term contracts with credit-quality counterparties. Performance should be somewhat similar to real estate, in that infrastructure has bond-like qualities stemming from the recurring cash flows tied to the long-term contracts, and stock-like qualities that can come from the improvement of cash flow quality or through EBITDA growth. It sounds like a good thesis, but it’s early days. So, most investors take a wait-and-see approach.
**Sitcom dream sequence ends and we’re back in 2019, with more than two decades worth of data at our disposal.**
Let’s see how the thesis from the ’90s played out: