Is this the market’s most-overlooked growth opportunity?

[00:00:03]Today on the rules of investing, I'm speaking with Ken Wong, partner and head of Asia-Pacific infrastructure at EQT Partners. Now, EQT may not be a household name for many listeners.

[00:00:15]However, the firm has a deep history and is investing at the cutting edge of what are some of the biggest structural growth themes taking the world right now. I'll be speaking with Ken about EQT's background and how the firm is investing in a massive digital infrastructure buildout that is being driven by exponential growth in demand for AI. Now, my name's James Marlay and this podcast is brought to you by LiveWire Markets. Ken, uh you're joining us from Hong Kong. Thanks very much for making the time to have a chat.

[00:00:45]>> Thank you for having me. Really glad to be on the on the podcast. Well, it's going to be a learning journey for me and hopefully a learning journey for our audience. Um, you're an Aussie uh by background and and as I mentioned, uh, EQT, not a a household name in Australia, but a firm with a a deep history and a lot of background. Can you introduce us to the firm and and tell us a bit about it?

[00:01:09]>> Yeah, absolutely. Um, you're you're 100% right. Um, EQT is probably the largest private equity firm no one's ever heard of. Uh, we we we know that. Um, if anything, it's probably a little bit by design. Um, a little bit about EQT. Uh, we're the third largest private equity in the firm after Blackstone and KKR.

[00:01:30]We're the the largest private equity firm in Europe, the largest in um in Asia. So, that makes us the largest private equity firm outside of of the US. Uh, we are headquartered in in Stockholm. We've been operating for over 30 years. Um, and over that time we've built the business um, originally with private equity uh, as the original founding principle, then into uh, infrastructure and and real estate, and then we've also made an acquisition with collar capital and now into secondaries.

[00:01:59]So all of that combined, we have close to half in Aussie dollars, just under half a trillion of assets under under management. Um, in terms of, you know, that that's just the the size and scale of EQ as as it is today. Um, what what I think is is really, you know, near and dear to my heart, but also a key part of the EQ philosophy is is actually not just our 30-year operating history as as a as a firm, but we actually have a strong tie with the the Wallenburgg family, which is a a sixth and seventh generation family who still today control 30 to 40% of the Swedish stock market capitalization.

[00:02:36]um and and have really been important for EQT in terms of defining our values, our value creation and how we govern our portfolio companies. Um and and and honestly, it's a it's a it's a privilege to be associated with with the Wallenbergs. Um um and actually they they have a very strong tie into Australia. Um it's one of those things that, you know, you wouldn't know about the name. Um but but um but even today we uh you know the Wenbergs have a strong tie with Australia. The the the the interesting stat I always quote with people is uh Australia's first honorary um citizen was Ral Wallenburgg um who during World War II saved tens of thousands of Jews um through issuing diplomatic passports, safe houses and and the like. and and actually you go down Parliament, there's a tree in in Ral Wenberg's name. There's there's a park in um in eastern suburbs of Sydney.

[00:03:33]There's there's memorials scattered all across Sydney, Melbourne, and Perth. So, you know, it's a privilege to be part of of of that ecosystem that that's that that's at least on the diplomatic and philanthropic side of things, but also on the on the the business side of things. The Wenbergs have been hugely influential in all across the world, not just in Sweden, Asia, and and specifically in Australia as well.

[00:03:56]>> For for listeners out there, it's worth jumping on Wikipedia to learn a bit more about the Wenbergs. There's some some great stories and um yeah, really interesting history there. But but Ken, as I mentioned in the intro, uh you're a Melbourne uh native, I I believe. Um and, uh bit of a stint with McQuary now with EQT. Um and some formative years for you setting up EQT's operations in Sydney. Maybe just tell us about a your interest in investing and and some of those experiences.

[00:04:28]>> Yeah, look, we um so I I I've been with ET coming up close to eight years now.

[00:04:35]um spent a little bit time in in in Singapore, which was our one of my closest offices to Sydney. We didn't have a presence at the time. Uh spent a lot of time in Europe. Came back in in February 2020. Um which was, you know, perfect timing before, you know, Australia decided to shut the borders and and and lock everyone in and obviously for everyone's safety. Um and at that time it was myself and two other two other colleagues who were in this very large office which we we had we we had uh built space for for close to 50 people and we had big ambitions. You know we were were pretty bold in our aspiration. We wanted to grow significantly um across all business lines infrastructure private equity real estate. Uh roll forward five six years from from when we started we we have 50 investment professionals. Um, we've done I think close to 10 or 15 billion dollars Aussie in deals. Um, so we're the we've grown the fastest any private equity firm has established itself in in in in Australia. We have one of the largest investment teams and we've certainly been the most active um all in the space of five six years. And I think that's a story that that that is not unique to Australia about EQ. It's globally, it's within our infrastructure business line, and it's certainly here in Asia-Pacific on the infrastructure side of things, but we see an enormous opportunity, as you mentioned in in your intro, driven by AI data centers and and ultimately the power required to um to power those data centers as well.

[00:06:03]>> We can see for those watching the video uh Hong Kong in the background um you invest across Asia-Pacific. tell us about the nuances of the different countries and economies that you're looking at.

[00:06:17]>> Yeah. Um I I always start with um a but my when I talk about Asia, I always I always start by by just you know highlighting to people Asia is a super broad church. Um and it's full of a whole host of different geographies, different countries, different cultures that are fundamentally different. You you have some of the most I think when people think of Asia, I think they think of developing Asia um is is is typically what what I see when I speak to some of our investors or clients all over across the world. they think of the the Southeast Asia of the world uh the Indas of the world where it's you know high population growth very rapidly growing economies or they think about the China and those you know rapidly growing middle class and that is obviously a big part of of the Asia story but also within Asia Pacific you've got the likes of developed economies some of the most advanced economies and largest economies in the world you know Japan um third largest economy in the world one of the most developed in terms of GDP per capita, in terms of technology, innovation, likewise with Korea, and you also have obviously Australia is part of the mix. So you really have this this dichotomy in in Asia Pacific of really fast growing economies with growing middle class and then you've got some of the most advanced technologically um uh economies driven by data center techn like silicon manufacturing uh um uh production of of of AI chips um you know Australia driven by mining you know property uh financial services or services generally Um, and then you that's at a macro and what drives those economies and then you get into how do you do deals in each of those countries and that that that that could be a that could be an hour podcast in and of it of itself. You know, dealing with deals in in India are certainly different from negotiating a deal in Korea or Japan or in Singapore or in Australia. And so that is the the EQ philosophy here is that we we we have a locals with locals approach. You need to have people with direct experience having worked in those economies knowing how to navigate those business cultures.

[00:08:40]What what makes a good deal? What are the some of the macro factors? You know when we think about an energy investment for instance um Korea and and Japan are net importers of energy. they they don't have as much um uh natural resources um and and dependent on on LNG and and coal. You've got the likes of an India which is a uh increasingly a huge coal consumer but also um one of the most rapidly expanding renewable energy capacity generators um in the world. It's it's actually the second largest market after uh China in terms of the size of that opportunity. So, you know, that's probably a really long-winded way just to give some of that color of of the breadth of of of of the geographies that and um we we we we cover in in in my team. Um but also that's the exciting part. It's a really dynamic. It's a really fast growing market and the infrastructure opportunities in this part of the world um are some of the largest as well.

[00:09:44]>> All right. Well, let's let's use that as a a launch point into where the rubber hits the road, where you're investing.

[00:09:51]Um, maybe you could just give the audience a flavor of the the the area that you're focused on from the infrastructure investment perspective, and talk to us about what what's driving it, how big is the opportunity, and where you see it heading.

[00:10:03]>> Yeah. Yeah, that's a super good good good lead in um to to what we're doing here at EQ Infrastructure. I I talked a lot about the EQT as a global platform.

[00:10:12]one I probably didn't speak about much was EQ infrastructure. So we are one of the largest infrastructure managers globally. We've been operating for 20 years. When we started the infrastructure strategy, it was with the principle of using that Wenmberg industrial heritage and private equity uh history that we we developed. Private equity was our first business line and applying that to infrastructure companies. It was a very simple philosophy that Leonard and Andreas who founded the the infrastructure business line started with to say why why do other infrastructure managers not have a hands-on value creation model for infrastructure companies? They all have management teams. They all have finance teams. They all need a digital strategy.

[00:10:55]They need an AI strategy today. They they have sales teams. They need to they have complicated operations in some ways even more complicated operations than a regular private equity owned company.

[00:11:06]Why would you why would you manage those companies any differently? And we developed this private equity toolkit and we had applied that to infrastructure companies and it's allowed us to grow into um one of the largest infrastructure managers globally. we have 20 22.5 billion um with our latest fund infrastructure 6 um and and at some point time in the not too distant future we also launching infrastructure 7 um and and what we've been really good at it at at ET infrastructure is investing behind thematic tailwinds and there are really two thematic tailwinds that we've been investing in for the last 20 years and that is digital um so we were one of the earliest investors in in fiber optic infrastructure before that was defined as an infrastructure asset class. Um and then also on the energy side those have been probably where we've deployed 70 to 80% of the um companies in the ET infrastructure business line and and those trends actually when when we talk about and look at the opportunities there globally those two sets are accelerating at a pace and the size of the investment opportunity we are seeing with AI the the shift to energy the energy transition shift and then the convergence of those two sectors to power those energy hungry data centers with with renewable energy. That convergence is is is is creating what we we see as probably the biggest opportunity in a lifetime of infrastructure investment and very strong returns.

[00:12:38]>> Maybe take us a little closer to the assets or the opportunities that you're seeing and and explain to the audience the the types of businesses or the type of assets that that you're backing.

[00:12:49]>> Yeah. Well, one of um I I'll I'll stay with with the AI theme because I think that is very topical and I think every day um it's a it's probably something that most people, you know, wake up and and wonder what's the impact of AI. Um and and so we're one of the largest investors in data centers globally. Uh we have one of the largest global data center platforms called Edge Connects.

[00:13:11]Um and in Asia Pacific um with the support of the global team, we actually have three partners who who who look after that asset. one based in the US, one based in Europe and one based here in Asia Pacific. Because it's such a large global business, the Ibida of the business in US dollars is something like three billion Ebida. And when we bought it, I think it was I think it might have been 100 million USD. So in 5 years, we've grown that platform enormously. My team has been helping expand edge connects in Asia-Pacific into India into Malaysia into Indonesia into China in the Philip the Philippines. Uh in Australia we have a partnership with Stocken. We announced a couple of a couple of months ago. Um Japan we've also announced some some data centers there. Interesting stat I know in Australia Chunk's you know considered the the gold standard in in in Asia Pacific. We actually have an equivalent size portfolio actually with some of the capacity we're about to announce. We have more capacity installed or announced capacity in in in Asia Pacific than Air Trunk. So we have kind of a a bigger platform from from Air Trunk hidden within our global infra uh global uh data center platform. Um, and so that that is a key part that that is a key area we're deploying in. And and and I think, you know, one of the interesting things and one of the questions we always get when we're talking to investors or potential investors in in our in our strategy is is it over is what is is AI overblown? Is there over is there a correction coming and and the like and and at least on the infrastructure side of things, we have a very different philosophy of of where we see the AI boom. Our strategy is is a pick and shovel strategy. Effectively, we're not making platform bets on is it Claude, is it is it Chat GPT, is it Gemini that that is going to be the dominant platform. We are just providing the infrastructure for those players to to power the LLMs. We are we are providing the the core and shell and and the data centers to to and the compute that that enable the provision of those services. We don't actually need to make a bet on on who's going to win those, you know, those those those um those those those platform wars. We are just providing the core underlying infrastructure that allows any one of those platforms to to exist. So that that's a key part on the on the digital on the data center side of things. We're also one of the largest investors in renewable energy. So even before AI was was a topical subject, we were investing in um in renewable energy, remote grids, um decentralized grids um and that's been a big part of our um our um our thesis. You know, we we actually built one of the largest renewable platforms in in India where we we have both a very large data center presence, but we also have a very large renewable presence. Um we in the space of five years took a team of of five people, grew it to 400 people um and built it into a business that had uh 5 gigawatts of operating capacity um or or signed in operating capacity. Um and and to put that in in in in scale for for some of the for the for the listeners on on the podcast um that is um that is probably the the same amount of capacity that uh was probably about 50% of the capacity that was installed a couple of years ago in Australia all in one company all in the space of 5 years. Ken, I want to take just back to to data centers for a moment and you talked about the question investors give you around does it feel frothy and overblown. Um I I thought maybe you could just put a bit more definition around um like how you get a return out of a data center because I've heard some debate about whether it should be classified as infrastructure property. You talk about the decay of the chips um and having to that heavy reinvestment cycle. So maybe talk to us just about how you generate those returns and think about it as an infrastructure asset.

[00:17:19]>> Yeah, that really really good really good question. Um so if you think about what it takes in um to in a data center to get a data center up and running, you always want to visualize it from from the ground up, right? So at at at at at the core of what you need is is a piece of land. A piece of land that needs to be connected to the grid or some sort of energy source to power the data center.

[00:17:45]It needs to have multiple fiber capacity lines into it. You need redundancy because they need to connect to other data centers or or an end customer. So you need multiple fiber lines um into those data centers. Um and then you need a building. So core and shell. it needs to have cooling inside of it, right? And then inside those data centers, we effectively lease space once we've built up some of these um some of these um data centers. We lease it to the likes of the Googles, the Microsofts, the the Anthropics of of the world who lease data centers who can either use it for hosting servers or they can use it for hosting their Blackwell chips or the the latest Nvidia chips to power a a data center. Where we stop on the infrastructure side is is the core.

[00:18:35]We're building we're providing the building. We're providing um we're providing the the core and shell. Um the energy cost to cool the technology that exists within the data centers is that is up to our customers to choose what equipment they put in the data centers.

[00:18:54]So we don't take technology risk. They are ultimately leasing in in in the data center space. they they pay for leasing based on um effectively on on energy consumption which they pay for but the model is effectively on on energy consumption. Um and so the the beauty of of of our investment model is we have and and most of the the largest customers in the data center industry are customers who are like the Google Microsoft who have credit ratings which are better than the US government. So they're AAA type of credit ratings. They effectively contract with us and usually we'll have a an anchor tenant or anchor customer before we've even broken ground on building a data center for 20 plus years on a a take or payoff in terms of capacity. So be once we've you know we'll have bought a piece of land um typically we'll know where the the sites have good energy connectivity and and good data good fiber connectivity because for instance in the US we're one of the largest fiber optic infrastructure owners we are the largest one of the largest renewable operators as well we we have a good sense of what what the good locations for for data centers and before we've even made the investment or started deploying capital we have already got an anchor tenant who has better credit rating in the US government. Uh they've committed to um to a 20 plus year lease. They have got um they have got we have got CPI protection and energy cost pass through.

[00:20:29]So the returns that that that you know that that's a very safe investment um that that we're able to make um and and and we'll obviously fill up the data center with with with other customers as as well. So that that's maybe the the 101 of of of of how a data center operates and the business model on on the ET infrastructure side of things. Um and on how we we contract with with our with our customers. Um there was a debate whether it's it's real estate or or um infrastructure. Um you know some of the large US um um some of the large data center players are listed US property REITs. Um I think I think today most people would would classify it as as an infrastructure investment. I think there is there is a little bit more to it just being um just a a passive piece of of of land. There is you know we just announced a partnership with Google yesterday. Um there is there is there's value to be brought to the equation from a whole of ecosystem approach and particularly as it relates to energy and bringing energy to the equation. If we can find a site, particularly in the US where we've got the land, the power, and the fiber connectivity, we would have a custom and we can get that up and running in 12 months. We would have a customer to sign on the bottom line tomorrow. Um, and so that's why I think it's it's not so much a real estate investment. There's there's value to be brought. There's a value creation angle in terms of bringing in a whole ecosystem approach partnerships with the hypers scale as an energy solution um and and optimizing for what what our clients are ultimately looking for our customers are looking for.

[00:22:10]>> Two questions. if you were to have a an estimate or a view on how far into this buildout we are because I think a lot of people are asking that question even if they're looking at listed markets and companies that are supplying into the data center buildout they've had a good run have we got enough like how far into this buildout do you think we are >> we're just at the start we are just at the start of this journey um we the the use cases for AI and therefore the look through demand on on what's required is is enormous. Um and so I I I approach that with you know if I if I think about the EKT house lens right we have 300 portfolio companies I think 700,000 employees sit across ET portfolio companies globally we were in Silicon Valley earlier this year with all of the EKT partners across business lines and the the thing that just absolutely never ceases to amaze me is the the value of what AI can bring to our portfolio companies. So absent us investing as AI as a theme and and powering the AI revolution with the infrastructure required for that when I think about the 300 portfolio companies we have globally and the AI initiatives we're driving in those portfolio companies to for productivity gains um enhancing how their processes work. Um, basically the way I almost think about AI is anyone who's got a university graduate degree has the ability to be disrupted by um by AI. So if you think about all of the salaries that you would be paying for people who have gradu and that's a little bit scary. I got >> I know I'm thinking >> it's it's a bit scary about what you know what I've got a young daughter. I don't I don't know what you know I I'm I'm glad that she's probably not entering the workforce anytime soon, but it's a little bit scary about the disruption that every university graduate um can be replaced by AI um or or today. But when you look at the exponential curve of the use cases that that that we see in our portfolio companies, whether it be healthcare or technology or even within our infrastructure portfolio, the uh it may not necessarily just be, you know, cost savings, but the efficiency that you see happening is just phenomenal. And you see that at Silicon Valley at the heart of everything. Uh there's there's a stat floating around that 80% of all code today in in in most of the you know the likes of of of um the large um you know US tech firms um that you that you for applications that use today are are done by AI and a year ago that was the stat was closer to to 30%. So most of the code that powers the applications you and I use every day in the last 12 months has gone up from something like 30% to 80%. Right. And and it's not that the number of engineers necessarily has as has software engineers has declined.

[00:25:29]It's that they're just becoming more productive.

[00:25:32]>> Yeah. More code being more code being written.

[00:25:34]>> Exactly. Exactly.

[00:25:36]>> You might have to take your uh maybe people will take their university degree off their LinkedIn profile so the AI can't go and find them and disrupt them.

[00:25:45]Um, Ken, Ken, where are the bottlenecks?

[00:25:49]Um, you've talked about insatiable demand, uh, big long pipeline. If you had a customer, if you had a data center to be built in 12 months, you could get it signed tomorrow. Like, what's hard about it? Where are where are the bottlenecks?

[00:26:02]>> Grid connectivity, grid connectivity, and grid connectivity. It's um that that is the biggest bottleneck um that that we see to why data centers uh are not actually being built out as fast. um we we would have the capacity install capac I actually don't know what this would be. It's probably double triple if not more if we were able to connect data centers to the grid more quickly than we can today. Any I'll use the US as an example the the wait times if you if you want a project to connect to the grid I think it's the last time we looked at it or I looked at it seven eight years before you can you can um before you can connect their data centers to the grid.

[00:26:43]So that is why we are trying to come up with solutions for our for our customers where we don't rely on grid connectivity. So a battery renewable or an off-grid solution to power the data center. And that's why when I say that's what I think is is quite unique about the EQ model because we are both a big investor on the data center side of things as well as on on the energy side.

[00:27:05]We we can package up a a whole of solution. We've literally gone through an exercise of mapping out where all our land is, where do we have generation capacity and where where where do we have fiber connectivity to offer gigawatt style campuses to our customers to say we can build it within 12 months because we bring all of the ingredients.

[00:27:25]But that energy is the biggest bottleneck and we see that actually all over the world. Um it it's hard to get the the pace at which grid need the grid needs to be built out um and stabilized because of peak load capacity from from you know from peak to trough as a result of solar um um and and and you'll know this in in Australia if you have a solar panel um you know energy is basically free during the middle of the day because there's so much excess capacity um >> so it's grid connectivity that's the biggest >> and and just let's stay with energy just for a moment because you talked about renewables being another really exciting structural trend that that you're investing in. It's quite topical at the moment. Um you know obviously we've had disruption to uh you know fuel supplies coming out of Hormuz. There's a lot of interest in in EVs battery storage.

[00:28:21]What's at the cutting edge for you? um h how far along in and progress are some of these energy solutions on the renewables front?

[00:28:31]>> Yeah, it's a super topical. I had my parents up in town um and they're in Melbourne still and and they were complaining about the petrol prices. So, it's uh and and it it hit it hits home, right? You it's um you really feel that dependency. Um so, it's super interesting what's happening in energy right now. The first is um there's I think most people are thinking about it in energy dependency terms or energy independence. I I think with the declobalization of the world happening because of geopolitics and the like everyone is starting to look inwards like all countries across the world are saying how do we ensure that we have a secure energy supply to to avoid shocks like what we're seeing as as a result of of the Iran war. That is a factor that has helped exacerbate uh or highlight what is happening on the energy side of things. But actually there are broader macro tailwinds around the energy transition. The first is actually a a a renewable plus battery solution is on a gigawatt or kilowatt basis cheaper to produce today than than a coal powered fire station. So this isn't some ESGled type of initiative and I'm talking specifically Australia, but that that that's very much the case in most economies across the world.

[00:29:55]Producing renewable energy with a battery solution is now cheaper than a coal fired power station and can be built in a much faster time frame than a complicated coal fired uh facility.

[00:30:10]Right? It's actually building plain vanilla solar with a battery is actually not that hard if you think about how relatively simple the process is. It it's obviously much more complicated when you scale into you know multiund megawatts or or gawatt style energy facilities but a solar panel and a battery is much easier to install at pace and at scale than a coalf facility and there is ex this significant capacity being built to produce panels um and batteries all across the world.

[00:30:41]China is obviously the largest manufacturer. So it's actually it's actually cheaper, right? Um and then what we're also seeing so it's it's a cheaper dynam it's a cheaper cost of energy and then what we're also seeing is the electrification of everything, right?

[00:30:58]um you know most you know EV cars are becoming close to parody from a from a um from a a regular IC um um vehicle. They they require less servicing. Um and then you you combine that with the you know with the power cost they're cheaper to run longer term. Um you're seeing the electrification of heat pumps for instance or or heating. Um so everything moved from gas um to to to electrified on on hot water and the like and then also on stoves right you know there's a ban that's come through um around using you know new homes in in in Australia I think in Victoria around the ban on on on gas fired stoves right so you have this huge energy consumption from from the electrification of what was historically from fossil fuels to um to electrified power sources and and and you know things being cheaper is a very strong motivator for people that you know the look through demand of consumers to to to cause significant investment in in in renewable energy sources and that's and that is happening all across the world. Um, and the Iran conflict is highlighting the importance of of being able to produce your own electrons in your home country because the world is is a much more geopolitically uh different place than maybe 5 10 years ago.

[00:32:28]>> Yeah, it's that it's the same thing happened during co with shoring up supply chains like you don't want to be too reliant on one particular supplier, one particular source. you look at the even the optionality the US has with their energy independence at the moment with with what's going on over in straight of Hormuz. So yeah um in terms of um portfolio companies and and companies that you've invested in just to give the audience just a bit of a flavor for the types of things that are under the some of these broad banners that we've talked about. Are you able to talk us through a couple of investments?

[00:33:00]>> Yeah.

[00:33:01]>> Or or just pick pick one?

[00:33:03]>> Yeah. Well, we've talked about edge connects on our data center things.

[00:33:06]We've talked about our renewable energy business. The other area that we invest in uh and we've invested quite heavily in is um and we've always been at the forefront of of the definition of infrastructure is is a business headquartered in Brisbane called Icon Cancer Center. Um so it's a cancer center. So we this fits in we have four buckets we invest in energy um energy digital transport logistics um and and then social infrastructure. So in businesses which are essential to service to to society provide essential service have higher barriers to entry and stability through economic cycles and and there are a number of businesses that we have across the globe. One of them is ICOM cancer center which is the largest cancer care provider globally.

[00:33:52]So Brisbane headquartered firm uh one of the largest business one of the largest of its kind globally. when we bought it, it had operations in in um in in Southeast Asia and and China. What we saw was an enormous opportunity to bring that business and export it to the rest of the world. One of the things that people probably don't appreciate about the Australian health care system is it's one of the few markets which have both a private and public um uh um health care sector that that coexist and and actually are symbiotic. Usually you have one extreme like the US where it's very much private and and you hear some of those stories about you know US private um health care systems and then and then there's some you know in in the Nordics for instance which is very much a completely public system. Australia is one of the few markets where there's a vibrant public and private health care system ecosystem and as you know when when we think about infrastructure what is our in what is our core value proposition as infrastructure investors it is to effectively invest in things that governments typically invest in whether that be toll roads initially and then energy um those are the things that people have historically invested also hospitals healthare systems >> airports >> airports exactly Exactly. So we are a private investor on typically what governments have historically invested in and healthcare is increasingly one of the areas where a lot of governments because of stretched budgets postco are not able to invest in the high capex needs of of sophisticated cancer technology like what we have at icon. So we we have the largest purchase of linear accelerators which is where they they they focus um a high energy X X-ray um uh radiation beam at at a at a cancer uh cancer cells to to shrink them. We're the largest chemotherapy u manufacturer in Australia. 70% of all chemotherapy bags are produced at an icon um compounding facility across the you know some of our our um uh world's best um compounding facilities globally are located in Australia and owned by Icon and we had a we had a thesis that we would take that model to Europe and um and and beyond. So we've expanded that business now into the UK um and we've expanded that business in the Germany under our ownership. We've in the course of the four or so years we've owned that business um we have we've upgraded so talking you know about a bounding creation model we put Paul mccllintok uh as the chair of that uh of that business he was formerly the secretary of cabinet he's been the chair of medy bankank medicare um sian health affinity health every major healthcare business in in Australia we have uh jean Patel who is the former or he's a board member of Nova holdings nova would household name Nova Nordisk It's the holding company of of Novo. Um, we have Jill Watts who is a Ramsey XCO of the UK business there. Uh, we have Professor John Zulberg, one of Australia's best cancer um oncologist um um who works at at Peter Mack in Melbourne. Um and we have ZA Peach who's who's worked in a number of healthcare business across Australia. And then and myself um and Ian Irving who's who's the doctor representative. And that's a typical EQ um governance model, direct expertise helping in those businesses.

[00:37:23]Business plan, ambitious growth plan to grow um the business. We've we've in the last four years, EBIT does grown two and a half, three times since we bought it.

[00:37:33]12 cancer care sites now approved in the UK, Germany, we have five sites up and running as well. All in the space of four years. So that rapid growth international expansion mindset which we talked about earlier in in the podcast um and and a key theme about how EQT infrastructure looks at the structural tailwinds in in a in a certain sector.

[00:37:57]Not what you would typically think of an infrastructure investment but if you think about business that through the cycle have stability and also um the ability to invest and also provide a social good. Uh, icon is certainly one of those one of those case studies we we we regularly reference.

[00:38:15]>> Yeah. I'll put the the case study to my wife. She's actually an oncologist. It works in both.

[00:38:20]>> Yeah. Public >> uh Port McQuary.

[00:38:23]>> Ah, >> yeah. Trained trained at Sydney University. Did um you know did did all of her train undergraduate training and and experience in Sydney and did a regional term up here and and uh fell in love with it. So yeah, but she's she would she'll be familiar with Icon. I've heard her talk about it in the house.

[00:38:39]>> Yeah, exactly. And you know, we'd always always welcome her to join the icon network of doctors.

[00:38:44]>> Well, I was about I was about to say if you're looking for a new board seat, um she's uh she probably ready to get involved. But I I just a question. The the visibility that you get across all of this economic activity, you're obviously looking at it from a private markets uh lens. Do you look at what's happening in public markets and and and form a view? I mean, um, you know, you look at the the exponential rise of these hyperscalers, the the the allconuming interest in in different ways to play AI. Do you feel like when you look at what you're seeing on the private market side, which we don't get as much visibility on and what you see on public markets makes sense the way that they're reacting?

[00:39:28]>> No. Is like I I think public markets are are interesting right now. we're seeing the volatility in in public markets and and I I'm always going to come at it from a private markets perspective because I work in private markets and we obviously being private markets is is the way forward from an investing perspective. Um we we think that you know having a longerterm horizon rather than a daily share price is is important um to make decisions right. We we see that all the time with companies that we've taken private and and when we get into under the hood you see the decision making is based on share price movements. You see it based on you know six monthly reporting and and making sure there's a good story for investors.

[00:40:14]We get to look through the cycle. we get to say where's the plan for the next five and then even further out 10 years for the next next investor as well and make decisions in in in in the in in that environment where we're not worried about share price movements and no business is bottom left top right so that's one element that I think is is super helpful about being a private markets investor the second thing that we see happening is what we call the pacification of p public markets right so there are a lot more index funds funds um who need to invest in in indices. So there's been an enormous shift from active fund managers to to index fund managers. And what that does because of the algorithmic trading is what you see is when there are shocks to the system that share prices drop more rapidly or they increase much more rapidly. Um and so that is is not necessarily where where you would have you know we all went to for those who went to university and studied commerce you you have that efficient market hypothesis. I think with the pacification of public equities now I'm not sure you could necessarily say the share price of a company today is reflective of public you know the true underlying value of of a company. And then the third thing is, you know, we do look at the indices. If you look at the indices, and I'll use the US example, the S&P 500, um, and I was talking to the head of of our US business just the other day. His friendly reminder that he gave everyone was of the S&P 500 of late, there's only 10 companies that are up, the other 490 are down, right? And so that aggregation of of of of returns is disproportionately weighted to a handful of companies which are driving the entire return profile. But actually there's a lot of companies that that that that is not the case. And so you you therefore then have a huge concentration risk now particularly in in a lot of these US companies which are driving all of your returns. And we are, you know, I I still have, you know, a super fund in in Australia and it's generating returns in in international shares and it's a it's a handful of company driving all of those returns.

[00:42:29]And I'm not sure if you're thinking about a portfolio mix and diversification.

[00:42:35]Um, you know, the only free lunch you can have in in finance um is is diversification. I'm not sure that is diversification.

[00:42:43]You you you juxtapose that with private managers where we are actively curating and and investing in a portfolio. We're diversifying the companies that we are investing in. We are doing significant due diligence and value creation on each of those portfolio companies. For me, it's chalk and cheese between public and private markets. But but I suspect if you had a public market, public equities uh guy or girl on your podcast, they would be they would be pretty worked up about what I've just said and and probably uh disagreeing violently.

[00:43:15]>> Oh, listen. I think listen, it's a that similar style views are being expressed like you know active managers in public markets are seeing those same things.

[00:43:26]They're aware of it. um you know the rise of of the of the index funds, quant funds um you know systematic investing.

[00:43:35]So it's you know similar style points but it's um I mean the the interesting comment you make to me to me which always resonates is is um about the mindset of taking that longer 5 to 10 year view when that all businesses have cycles right and um you know the that's what you see with with markets public markets at the moment is that quarterto quarter or you know half year to half year reporting and the decision- making that goes around that I think that that's you know and and there are businesses that are listed that have that mindset and and you can see over the long run they've done incredibly well but that that managing for a reporting period you can see where that creates some um some hazards. It's a it's a good point because we we just do this as part of our core underwrite of any deal that we do. But but um as important is of of the case that we underwrite you know over a call it 5 to sevenyear hold period we are just as focused as what is the underwrite of that that next 5 years after we own that company. So we we always have this this concept of the next buyer analysis. What does the business look like after we're done growing it? And and what's the type of investor and what have we said or invested enough in the business, not just for our growth, but when we when we ultimately sell a business that there is enough growth to come through for for that next buyer. And and so we're really always thinking about five year for our investment horizon, but then that next 5 to seven year horizon for for that next investor. And as you said, that is a fundamentally different value proposition from quartertoquarter or halfear result to halfyear result.

[00:45:17]>> Ken, I'm going to finish with a quick one.

[00:45:20]Um, what is the investment opportunity you think is being most underestimated or misunderstood right now?

[00:45:27]>> Most misunderstood is is AI infrastructure, not AI, AI infrastructure. and what we've just talked about on on that and we've just it's the it's the picks and shovels to to what powers AI and so a lot of people will be you know there's a lot of investments in AI that I'm not sure I would be capable of of picking some of the winners and losers in in a software technology um perspective but but I think hugely misunderstood about the AI infrastructure. I think most of our competitors probably understand that on the infrastructure space, but I think the the the average person down the road would say paints all of AI in that same bucket of, you know, is open AI going to collapse or not and what's the implications. I think that's the most misunderstood to your second part of that question of what's what's undervalued, what's what's the biggest opportunity. I think that is it's in the same breath that that AI is is also a huge infrastructure. Yeah, awesome. Well, Ken, um, thanks so much for taking the time to come on the rules of investing and, um, share some of your insights from what you're seeing on the infrastructure side. And, yeah, I really appreciate your time on the podcast today.

[00:46:37]>> It was great. It was great chatting. I really enjoyed the conversation and thank you for your time as well, James.

[00:46:41]>> Ladies and gentlemen, I hope you enjoyed that conversation with Ken Wong, who is the partner and head of Asia-Pacific infrastructure at EQT Partners.

[00:46:48]Remember, you can find all our episodes on the YouTube channel or the major podcasting platforms. We'd love to have you on board and we'll speak to you next time.