Inside the Mind of Tara Davies: Co-Head of European Infrastructure, KKR.
1. How did you get started in private infrastructure investing?
I started my career as a chartered accountant in Australia in the 1990s but pivoted to investing in 1999 and moved to London in 2004. Before joining KKR in 2016, I spent 17 years at Macquarie Group within the infrastructure team, working on both the investing and advisory sides. This experience both shaped my approach to deal-making and helped me understand the perspective of the people that make things happen in the businesses we invest into. Currently, I am the Co-Head of KKR’s European infrastructure team, leading our evergreen infrastructure strategies, and Co-Head of KKR EMEA.
2. What major themes do you see as shaping the private infrastructure market currently?
Several long-term themes are driving what KKR is finding as the most compelling investment strategies and opportunities in private infrastructure markets. The three themes KKR focuses on are:
Digitalisation: Data is the fastest growing commodity in the world, with global Internet Protocol (“IP”) traffic expected to increase by 13% CAGR . KKR believes data will be seen as a “fourth utility,” because critical business, government activities and routine aspects of daily life are so dependent on seamless connectivity. Just like with more traditional utilities, to support the enormous growth in virtual activity, we need more physical infrastructure, including data centers and communication networks. Our investments in digital infrastructure cover everything from Italy’s fixed-line network, where KKR is investing in to bring more people and businesses high-speed, reliable internet, to large, cutting-edge data center companies with sites located globally.
Energy Security: KKR believes there is tremendous opportunity to invest behind growing energy demand. That means investing in secure and sustainable sources of energy as well as the heavy assets that help transmit energy. The global shift from fossil fuels to renewable energy is a major driver of private infrastructure investment and KKR has invested ~US$34 billion to date into assets related to the energy transition.
KKR’s investment in the American utility scale solar and energy storage company Avantus is an example of a direct play on this theme. We also own Zenobe, a company that provides charging as a service for government and corporate fleets. Beyond the energy transition, however, we also believe it is critical to invest in distribution and transmission networks. In the United States, for example, KKR has invested in one of the largest electric utilities in the country, and we aim to help them meet increasing customer demand and continue building a more reliable grid for the future. Investing in energy security, particularly through liquefied natural gas, is another interesting way to invest behind this theme.
Deconsolidation: Today’s markets reward companies for shedding heavy assets, particularly those that are not core to their mission. In corporate carve-out transactions, infrastructure investors have the potential to form new companies focused solely on providing essential services and provide a level of attention and capital that may have been lacking when the company was merely a division of a large conglomerate. KKR can leverage its expertise and track record in complex carve-out transactions to unlock value, enhance operational efficiency, and drive successful outcomes. The energy sector, driven by the transition to greener sources, is a prime area for such opportunities.
3. You mentioned energy security as a long-term trend opportunity today. To what extent do you see the transition to renewable energy impacting infrastructure investment strategies over the next decade?
The transition to renewable energy represents a generational opportunity for private infrastructure investment strategies. Many nations and companies have committed to emissions targets that require large-scale decarbonisation, but the security of the energy supply is also a top concern for many countries at a time of heightened geopolitical tensions. As renewable energy sources like solar and wind energy become more cost-competitive, they are increasingly seen as viable alternatives to traditional energy sources.
Europe presents one of the most attractive markets for renewables today. Unlike other regions that can depend on locally sourced traditional energy for security in a deglobalised world, the European Union predominantly relies on imported energy. Renewables offer a crucial opportunity to enhance their local energy supply and bolster independence. Additionally, the cost-competitiveness of renewables is further enhancing the appeal for renewables. Solar and wind energy, for example, are now often cheaper than fossil fuels, creating growth opportunities based on economic viability rather than reliance on government incentives. This shift allows private infrastructure investors to target projects that offer sustainable returns while contributing to environmental goals.
Overall, the transition to renewable energy is expected to significantly impact infrastructure investment strategies by prioritising sustainable projects that align with decarbonisation goals, offering both environmental benefits, self-sufficiency and potentially attractive financial returns.
4. How do you assess the balance between sustainability and profitability evolving in infrastructure investments and how does it continue to motivate you in your role?
As an asset manager, I believe KKR has a fiduciary obligation to manage the investments sustainably for the long-term. This doesn’t mean strong returns need to be sacrificed.
As a firm, KKR looks for the material sustainability issues in each industry we invest in, making sure we are identifying and weighing the most relevant factors that could impact the long-term viability of the businesses. And we have found as we implement value creation plans that the things that make businesses more valuable also tend to improve their longevity.
In infrastructure, this is especially important because the assets KKR invest in are often crucial to people’s lives. Broader trends like decarbonisation are not things we invest in just because they’re sustainable, either. Yes, they address pressing global challenges but also offer significant growth potential.
5. How has private infrastructure performed during past market downturns and what structural protections does KKR implement to safeguard investor capital?
Private infrastructure has shown resilience during past market downturns, largely due to the essential nature of the assets we invest in and the critical services provided, which maintain a steady demand even in challenging economic conditions. Indeed, the counter-cyclicality and capital preservation characteristics inherent in the infrastructure asset classes is typically why investors allocate to infrastructure.
Infrastructure assets provide critical services to the global population that are required through economic cycles, which tends to make them more robust in times of market volatility. For example, even when markets are gyrating, people still need telecom towers to power their mobile phones. This resilience is further supported by the consistent cash flows generated by infrastructure investments, which are often backed by long-term contracts and regulated revenues. KKR has invested ~US$30 billion globally in digital infrastructure, including fiber, data centers, and telecom towers across multiple platforms and more than 100 data center facilities and are today one of the largest data center operators in the United States.
As an investor that has been in the markets for nearly five decades, KKR has learned from previous cycles and developed an investing playbook that informs our approach to dislocated markets. Simple concepts like more diversification - a thesis that is in our control - and linear deployment, all help improve the robustness of our investments.
KKR tends to target essential private infrastructure businesses with long-term cash flow visibility. Approximately 85% of KKR’s Infrastructure portfolio is under contracted or regulated cash flows, ensuring steady revenue streams and minimising risks associated with market volatility.
Inflation hedging is another important consideration. Infrastructure assets often have pricing power and contractual adjustments that provide a hedge against inflation, aiming to preserve the value of investments over time.
Finally, KKR looks to preserve returns in volatile environments in two ways: diversification and risk management. Investing across a range of infrastructure sectors and geographies reduces exposure to any one specific risk and enhances the overall resilience of the portfolio. We also look for high-quality assets that have features that safeguard investor capital and bolster long-term performance.
6. You are one of the few female leaders in the global private infrastructure market. What has contributed to your success, and how can the industry better attract and retain a more diverse workforce?
I attribute my success to the following factors:
• Transparency and open dialogue: I’ve always encouraged transparency within my team, allowing anyone to call out my blind spots and biases. I’ve found this openness fosters constructive and open debate, which I firmly believe has contributed significantly to my team's, and ultimately my success. Good news travels fast but bad news and risk should travel faster.
• Willingness to learn and accept advice: I truly value advice from those who know me well and especially appreciate the guidance and wisdom of the partners here at KKR.
To better attract and retain a more diverse workforce, the industry can focus on:
• Celebrating different perspectives: Fostering a culture where team members feel comfortable discussing biases and blind spots. This is more fruitful if there are different perspectives around the table (e.g. skills, culture, languages etc)
• Providing mentorship and development opportunities: Teams made up of people who are prepared to do the right thing and give back what they have learned is the key to succession and longevity of businesses and people.
Opportunities for new challenges and development opportunities from leaders is imperative.
7. What’s the best piece of investment advice you’ve ever been given?
Investing and value creation is about people. As such, as very technically oriented individuals, over time, good investors tend to hone their people skills - relationship skills, putting oneself into other people’s shoes and trying to understand their objectives, negotiating, empowering and leading - the softer skills in many ways are much harder to hone. For me, the muscle memory you develop over time has heightened my general investment acumen and conviction.
8. Quick fire questions:
a) What career path would you have chosen if you hadn't gone into finance?
An Olympian
b) Which do you prefer - Morning meetings or late-night deal-making?
I prefer morning meetings, as they allow for clearer focus, fresh energy from participants and myself in open dialogue which leads to more structured decision making.
c) What’s your favourite book or podcast and why?
The book A Town Like Alice by Nevil Shute. I like its powerful story of resilience, determination, and the ability to rebuild and thrive after immense hardship. The characters’ strength and optimism in the face of adversity are truly inspiring.
d) What’s one lesson from your early career that still guides you today?
Consider the importance of people’s “hearts and minds”. Genuine connection, empathy, and clear communication often determine the success of any initiative just as much as strategy or execution.
e) Being a true Sydneysider, what’s the one thing you miss most about Australia?
I miss the gorgeous beaches and proper sunlight! There’s nothing quite like the coastal breezes and bright sunny days all year round.
1 Source: November 2024’s Ericsson Mobility Report
2 As of 31 December, 2024
This article has been prepared for use only by wholesale clients (as defined under the Corporations Act).
Channel Investment Management Limited ACN 163 234 240 AFSL 439007 (CIML) is the responsible entity and issuer of units for the KKR Private Infrastructure (KIF) Fund (AUD) ARSN 673 739 430 (KIF AU Fund). Neither CIML, its officers, or employees make any representations or warranties, express or implied as to the accuracy, reliability or completeness of the information contained in this article and nothing contained in this article is or shall be relied upon as a promise or representation, whether as to the past or the future. Past performance is not a reliable indication of future performance. This information is given in summary form and does not purport to be complete.
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