Our investment in Pontoro — infrastructure lending tokenisation
Infrastructure lending is not an area where you’d expect to find cutting edge innovation. The slow and concentrated (but enormous!) market has operated much the same way for decades. Pontoro is building the architecture to power this market for the next generation.
We are excited to participate in the firm’s $6.2m Seed raise alongside Ulu Ventures, Adit Ventures, Intesa San Paolo, R3, FinVC, Bloccellerate and others.
Infrastructure is everywhere
Infrastructure is unlike any asset class in that it has a direct impact on people’s lives. Transport, communications, logistics, water, & energy are critical parts of the functioning of our global economy. However, most of us wouldn’t think twice about how a bridge we’re crossing or a tunnel we’re driving through were financed. Some projects are publicly funded by governments or local authorities, while others are funded through private investment. The financing structure is usually a mixture of equity and debt. The debt is fairly straightforward, it is usually senior and financed at a spread over a floating rate (eg. 300–400 basis points over Libor).
$94trn of infrastructure investment will be required globally through 2040
That’s right $94 trillion, with a ‘t’. These investments will be required to both expand and maintain current infrastructure. At current investment rates, the G20 estimates that there will be a $15trn shortfall in investment between now and 2040.
Global leaders have made material commitments to increase infrastructure investments including:
- Biden signing a $1trn infrastructure bill in the US
- India to spend $1.4trn building infrastructure
- Europe launches its ‘global gateway’ program
Infrastructure lending for institutional investors
The vast majority of infrastructure loans are originated and financed by the world’s largest banks. It is an elite, closed world where the top 10 banks finance nearly 40% of the market. The loans are syndicated amongst the banks and a portion are sold to institutional investors. From the buy side perspective, infrastructure loans can offer portfolio diversification while providing a low volatility, inflation hedged, income stream.
However, many institutional investors are unable to invest in this asset class because the loans are not actively traded or priced instruments. Investing in infrastructure debt funds that hold these loans can be an alternative to gaining exposure to this asset class but it doesn’t allow investors choice in their asset exposure and introduces an additional layer of, sometimes significant, fees.
Pontoro
Enter Pontoro — this early stage business out of California is building the infrastructure (pun intended) to revolutionise the industry market structure. The business is looking to increase the universe of institutional investors that can access this asset class by transforming loan assets into digital securities and generate secondary trading liquidity.
It aims to do so by sourcing high-quality infrastructure loans from the bank originators, securitising this pool of assets to broaden the potential investor base, and then allowing investors to dynamically create their own bespoke sub-portfolios by increasing exposure to specific assets. This competitive allocation of the assets will generate pricing data non-existent in the market today that will then drive secondary trading activity — all facilitated by their tokenised approach to reduce the cost and friction of settlement and custody.
Bringing together start-up, technology, and infrastructure lending experience, Co-Founders Antonio and Bob have assembled an all-star team of technologists and infrastructure investors that have the credibility and know-how to bridge the gap between these two disparate worlds. Their advisors include Tracy Olsen who was Head of Product at BitGo, Paul Atkins, ex-Commissioner of the SEC, and Annemarie Tierney who was Head of Strategy at NASDAQ Private Markets.
We are excited to partner with the team at Pontoro as they embark on this ambitious project. We will leverage our experience in both traditional finance and digital assets to help the founders with the next steps in their journey.
