Five Questions With … David Hudson, Senior Managing Director, Darby Overseas Investments

1. You were recently hired to lead Darby’s Asia activities and its global infrastructure initiatives. How did you hook up with the firm?

I’ve been working in emerging markets throughout my career, and I was aware of Darby’s activity early on when they were focusing on Latin America. We started having discussions about a year ago. And I knew some of the people and also their reputation and what they were doing. That led to discussions on Asia and infrastructure. So it was being aware of what Darby was doing and my background in emerging markets. I thought it would be a good fit.

2. Darby’s been involved in infrastructure for some time. What new things is the firm trying to do?

We have developed infrastructure-focused funds in specific countries, which are local currency funds. We did that in Korea, which is up and running, with backing from local pension funds and insurance companies. And we are working on closing one in the next couple of weeks or so in Brazil, which will be a local mezzanine infrastructure fund.

3. The need for investment in U.S. infrastructure is well documented. What are the needs and opportunities in Asia and other regions?

It’s a lot of the same. The niche we’re trying to focus on is what we call mid-size infrastructure. It’s not the mega-deals. Our investment sizes tend to be in the $20 million to $30 million range, maybe up to $50 million, but we’re not hundreds of millions on each investment. It can be in water, natural resources, transportation, telecom. And we see lots of opportunities for that in the private sector and in private-public shared opportunities as well.

4. How do you feel about all these other firms such KKR getting into infrastructure?

A lot of money’s been raised for infrastructure in the last few years. Time will tell how it all plays out in terms of the pressure it puts on values and opportunities. But I think there is a huge need for infrastructure investing too. So the right balance will have to be achieved between all the funds that have been raised and the opportunities.

5. What are the differences between investing in emerging markets and established markets?

The regulatory frameworks, the contractual frameworks, and the commitment between the government and the private sector. If you go back in time, there was a period where a lot of projects were falling apart because the regulatory or legal frameworks weren’t strong enough. What I think is very important in infrastructure is to have strong knowledge on the ground in the countries. That’s one thing we do: We have people in place in the countries who are very knowledgeable and experienced, and I think that’s quite important, rather than trying to do it cross-border.

Edited for clarity.