Angel Fierro, managing partner of Aiga Capital Partners, joins host Jon Finger for a conversation about how emerging fund managers can make an impact in specialty lending areas such as energy transition. Aiga Capital Partners provides private debt and preferred equity solutions to North American-based sustainable infrastructure developers. Sharing his own journey, Angel encourages new managers to bring fresh ideas to the market and persevere when facing obstacles. “It takes a great deal of work and some sleepless nights, but know that, in the end, it's worth it,” he says.

Connect and Learn More

☑️ Angel Fierro | LinkedIn

☑️ Aiga Capital Partners | LinkedIn

☑️ Jon Finger | LinkedIn

☑️ McGuireWoods | LinkedIn | Facebook | Instagram | X I YouTube

☑️ Subscribe Apple Podcasts | Spotify | Amazon Music | YouTube 

This podcast was recorded and is being made available by McGuireWoods for informational purposes only. By accessing this podcast, you acknowledge that McGuireWoods makes no warranty, guarantee, or representation as to the accuracy or sufficiency of the information featured in the podcast. The views, information, or opinions expressed during this podcast series are solely those of the individuals involved and do not necessarily reflect those of McGuireWoods. This podcast should not be used as a substitute for competent legal advice from a licensed professional attorney in your state and should not be construed as an offer to make or consider any investment or course of action.

You're listening to Fund Flow, a podcast for emerging managers, offering insights into the journey of new and aspiring fund managers seeking to have access in a crowded market. Tune in as McGuireWoods partner and host, Jon Finger, is joined by guests ranging from first-time fund managers to proven emerging managers, experienced LPs poised to back emerging managers, and other key participants in the emerging manager ecosystem. Hear their real-world perspectives and gain actionable tips to help inform your strategy and position yourself for a successful fund closing.

Welcome to Fund Flow, a McGuireWoods podcast for emerging managers. I'm Jon Finger, and today we have Angel Fierro, managing partner of Aiga Capital, joining us. Aiga Capital is a minority-owned investment manager providing private debt and preferred equity solutions to North American-based sustainable infrastructure developers. Aiga's mission is to provide asset developers with growth capital to catalyze the deployment of assets needed to meet net-zero emissions targets. Angel, thanks so much for joining us today.

Thanks, Jon. It's great to be here.

Let's start by talking a little bit about Aiga Capital and what led you to your focus on sustainable infrastructure opportunities.

So I've been focused on renewable energy since around 2004 and my co-founder Rory Meyers since about 2008. Our journey has been about accelerating the growth of energy transition infrastructure. Rory and I met at Credit Suisse Investment Bank in 2008. I was in the investment bank advising renewable energy companies while Rory was on the renewable energy investment team deploying balance sheet capital in the form of project tax equity and cash equity. The bank's first two tax equity investments were with two of my clients, so Rory and I developed a strong relationship in the trenches of closing those two deals. We stayed in touch through the years, and as we thought about our next chapter, we had a shared goal of continuing to help accelerate the energy transition and of course foster resiliency on electrical grid in general, grow and build more infrastructure.

The renewables market, when we started thinking about the next thing around 2016, 2017, was one that faced significant headwinds. So our objective was to focus on what are the key gaps negatively impacting growth. We quickly gravitated towards creating an investment product that would fund pre-construction development expenditures, but also capital expenditures such as siding and permitting costs, engineering and design, equipment procurement, and deposits for interconnection, and power purchase agreement security. Back then, private credit solutions for pre-construction capital, so project developers either raised expensive equity or sold projects to generate corporate liquidity. Rory and I set out to change this and began pitching family offices in the same period. After a lengthy process of working closely with a few innovative family offices, we received our first mandate in the spring of 2018 to find a candidate for this infrastructure private credit product. We went to market with a pretty defined idea of what we wanted a structure to look like and closed our first development loan in Q3 of 2018.

From 2018 to 2020, we deployed approximately 450 million across three investments which delivered attractive returns. We're also impactful and catalytic to asset and platform growth. For the most part, the strategy and structure that we're deploying today under our first fund is the same as what we had brought to market in 2018. At the time, there was no real market for mid-market or large market development capital, but since 2018, the market for credit-oriented development capital has grown with at least a half dozen to a dozen other specialty lenders like ourselves. I don't know that we can take credit for the evolution of this market, but we're certainly proud to have played a significant role.

That's great. So as that evolution has occurred with your platform, how did you and your co-founder think about assembling the team, what you're looking for, what your priorities were in those formative years?

Well, building an investment management platform from scratch has had many challenges, but we've been fortunate to work with some very talented and motivated individuals. From the start, Rory and I were very deliberate that the team needed the right mix of investment execution capabilities as well as asset management, structured finance, and project development know-how. A few of us on the team have been on the project development side and operations too. My partner, of course, brings a deep background in investing in asset management within renewable energy. Even our junior investment team members come from the renewables finance world.

As I mentioned, prior to raising our first fund, we partnered with family offices on those pre-fund investments, but we also had an advisory business where we worked with developers and buy-side clients that we're investing in project equity as well as buying and selling assets. Many of our current team members have been with us since those early days, which has allowed us to fine-tune our investment criteria, establish due diligence, modeling templates, create proprietary databases of the sustainable infra developers, as well as M&A multiples for projects that have been bought and sold over the last eight-plus years. Working with our core team for so many years has also helped us create a culture of passionate, hardworking problem solvers. Lastly, but importantly, my partner and I are both minorities which inform our views on the value of diversity across the firm. A large part of our team identifies as either female and/or minority.

Now that team has been constructed, as an emerging manager, looking back on the past couple years, what were some of the biggest challenges you faced in getting Aiga Capital off the ground?

Since inception, really in that 2017 period, my partner and I have focused on operating the block. Prior to the fund, we were running the advisory business alongside the deal by deal investment management work. This helped us achieve our goal of operating profitably, but once we fully switched over to the institutional fundraise, we shut down the advisory work. This meant we had to fund our team while raising capital, and doing so in a tough fundraising environment from 2022 to 2024.

So capital formation has definitely been the biggest challenge, not just from the standpoint of making the types of investments we targeted, but also to fund the team and of course paying for the back office service providers that we wanted. It was a juggling act for over two years, but thankfully, we had built up some reserves and were able to close our anchor investor early on. The family offices who had helped us build our track record also came into the fund early on, which helped a great deal. Look, I can't say enough about our partnership with our anchor LP and our family office partners. They've provided invaluable advice, connected us with other investors, and most importantly, are highly aligned with our mission of supporting the growth of sustainable infrastructure.

It's also worth double clicking on the fact that we brought a new investment product to the market. The demand from developers of sustainable assets for this product has been high. However, infrastructure private credit is still an emerging component of LP portfolios. Educating the LP market about a new product that doesn't fit neatly into the private credit, infrastructure equity, private equity, or venture capital buckets has been a process. And on top of that, we're focused on energy transition, which is a relatively new industry. So when you put it all together, we're an emerging manager. We don't have backgrounds from big PE names. We're doing this without a placement agent in a relatively new market with a new product. Rory and I knew it was going to be a challenge, but all of the aforementioned obstacles definitely made it that much harder.

You touched on your LPs and some of the challenges, but how did you approach and what were some of your most successful, you think, strategies in building that trust with LPs as a relatively new player, candidly, particularly without a placement agent to do some of that hard work for you?

Yeah, great question. I think it's about spending time with them to understand their objectives, but also their concerns. From a strategy standpoint, we offered, and still offer, to landscape the energy transition market for them. We've been doing that for family offices and other LPs from the very beginning. It's also important that LPs understand that Rory and I have been filling gaps in renewable energy financing for an average of 18 years each. We've been there for most of the growth in solar, storage, and the wind sector, and have also participated in the growth of low-carbon fuels. We're definitely filling a different gap today, development capital, but the underwriting and asset management is relatable and leverages our prior experiences.

So we may be a new fund, but we've been doing this work a long time as prior investors, as investment bankers, as due diligence consultants, asset managers, and of course project developers. So it's about walking the LPs through those backgrounds and our new strategy, our approach to alpha generation, and the toolset we've developed for decades to mitigate risk. That toolset includes our experience with effective management teams over the last couple of decades, our robust approach to asset management, origination that's based on trying to meet as much of the market as possible, the cloud or downside protection that's informed by our proprietary database of project M&A multiples, project assessment based on being ex-developers, and having the right structural protections that support not just the backup plan but the backup to the backup plan.

You touched a bit on your strategy. I guess, how do you think as an emerging manager relatively new to the fund manager space, how did you differentiate your investment strategy compared to other more established managers?

Well, we didn't think the market needed another private equity or infrastructure fund. There are plenty of them out there, but the market was not paying any attention to funding pre-construction development and pre-construction CapEx for that matter with credit. In our view, this was clearly holding back the build out of energy transition assets. So we brought to market a unique structure and focus that private credit and private equity we're just not paying the right attention to despite the fact that there's a tremendous amount of unencumbered assets and cloud value out there.

As it relates to our specific strategy, we believe we know the product better, that we know how to assess the risk better, and we believe we understand the arbitrage better. When we had our advisory business, we were regularly hired by private credit and private equity firms to perform due diligence on renewable energy projects and portfolios. Now we're just doing that for the fund instead of for others. We're also not the type of investor that's going to rely solely on our credit agreement. We need to make sure we fully understand the collateral story and the materialization of downtime protection, and to do this, we need to be differentiated in our expertise, in our experiences and the proprietary work that we're bringing to manage the risk of each investment.

You touched on the advisory experience, and I think that's something that's often very important and valuable for an emerging manager to bring to the table. As with that backdrop of your advisory work, without giving away all of your secret sauce, how does Aiga Capital evaluate potential investments? You talked about a bit of the structure you are offering from a investment tool perspective, but how do you evaluate the investments? And what are some of the most important criteria that you look for when choosing an infrastructure project that you think makes sense for your fund?

For us, it's all about the collateral as well as the teams. But it's important to know that we're not a project investor. We're investors in platforms that are developing large portfolios of infrastructure projects. So we're taking collateral against an entire portfolio, some of which may be operating, some in construction and a large amount in development. So the collateral is the focus of our underwrite, but unlike traditional project finance, we see value in late stage assets that have a fair amount of milestones achieved and are anywhere from six to 12 months from project finance. So we assess the value of everything that's operating in construction, but also in the stages of development, be they late stage development, mid-stage or early stage.

In terms of our approach to collateral underwrite, we perform a ton of work to meet as many developers as possible to understand the latest trends in pricing, revenue contracts, construction contracts, and any of the other key project contracts as well as permits. This all informs our assessment of a company's collateral and what the collateral could be worth in a downside scenario. We anchor the collateral around those late stage development assets and certainly construction and operating assets that we are confident have a fair amount of value in the market. Then we work with the developers to outline the credit box for deploying the development capital into the next set of projects that are coming on. We probably spent a lot more time with our portfolio companies doing this work upfront, pre-closing than most, but this makes deployment of the capital and the asset management work that much more efficient. In parallel with the collateral analysis, we focus in on the management team, the development processes, their systems, their back office, and overall rigor that the company uses to execute and manage risk across the portfolios.

This may be a slightly unfair question, but I'll ask it anyway. In light of the recent election, we still have uncertainty where things land, but how have you been factoring in the regulatory change, the administrative change? How do you think that is going to impact your business? How do you think that is going to impact your investing activities and infrastructure opportunities going forward?

Well, they're certainly uncertainty, but I'd say the one absolute certainty in sustainable infrastructure is that it's always changing certainly energy transition infrastructure, and has for the last several decades. We've gone through many government administrations and legislative changes with PTCs on and PTCs off, ITCs on and ITCs off, and the industry continues to adapt and evolve and grow. The current task at hand is to address the uncertainty around potential changes to things like the Inflation Reduction Act and possibly tariffs. But regardless, there is a breadth of invested capital and market participants supporting the energy transition.

The tremendous support from corporates and states are also pushing for renewable energy, and we're expecting that to occur during this next administration, just like it did the last time this administration was in office. Keep in mind too that the demand for power now is substantial, and utilities are having a hard time keeping up with the demand for growth from asset, from AI, from crypto assets, domestic manufacturing, electrification of everything, all while trying to ensure that the grid continues to be resilient. So there is uncertainty about changes. The one thing we can certainly say is that we're going to need a substantial amount of growth in energy infrastructure overall, and energy transition infrastructure is going to play a role in that.

Whether you're driven by climate change mitigation or simply growth and power infrastructure, the next few years will be about building all the energy infrastructure possible. Aiga will continue to focus on creative and innovative capital solutions tailored to meet the needs of the sustainable infrastructure component of that. And today that means renewable energy, energy storage, low-carbon fuels. But from here, the market will continue to evolve, and as new and more mature technologies become technically and commercially proven, we'll focus on those next set of assets as well.

That's a great perspective. Digging down a little further on that, certainly not a new segment, but one that has had renewed interest in the past however many months, what are your thoughts and the firm's thoughts around nuclear? And how do you feel like the opportunities will evolve in the future as we look back to nuclear as a true and attractive alternative for many projects?

Well, our perspective is that the portfolio for meeting the energy transition is all of the above. There's no one silver bullet. It's nuclear, it's solar, it's wind, it's battery energy storage. They're all going to be needed, especially with the growth that the market has experienced today due to all those things I just mentioned, AI and crypto in particular, that are driving that growth. So we do expect nuclear to be a part of that story, and those are very large investments that will require the backing of some of those very large corporates and potentially the government as well.

The thing to keep in mind though is that those are still assets that are going to take time to bring to market. The permitting is substantial. The construction is substantial. The amount of capital needed to raise for those assets is substantial. I'm not a nuclear expert, so I can't sit here and tell you it's five years away or 10 years away, but I do know it's a fair amount of years away. Whereas what we have in front of us are assets that can be deployed in relatively quick order, and that's solar, battery energy storage, and of course wind. Those are deployable today, fairly quick construction, and meet the needs of the market pretty quickly. So that's where we're going to focus our time, but we do expect there to be a pretty broad and diverse set of new power asset classes coming to market.

Absolutely. I will very much appreciate your industry expertise there, but getting back to some of the core of this podcast and what we're about, as you think about the decision to raise a committed fund and going through that process in a tumultuous time with an evolving landscape, maybe share with the listeners a little bit more about your fundraising journey and things that potentially you may have done different or just a more narrative about that process. Again, particularly without the backdrop of a placement agents supporting you.

The partners are super important, and obviously, it takes a great deal of work and some sleepless nights, but know that in the end, it's worth it. The market evolves because the market has new entrants, and emerging managers have a lot to bring in terms of new ideas, new execution, new approaches to execution and teams that are eager to make the kind of investments that they're out to get. So for us, it was a great deal of hard work and managing a fair number of challenges, but we couldn't have done so without the right team and the right partners. So I'd say having sought and partnered with our anchor investor, the family offices that we were doing pre-fund investments with, and having spent the time with them to speak to the potential in the market, that was probably the biggest milestone for us in our journey of success.

And then just staying at it, honestly, we're probably no different than a lot of other funds where you have the same conversion, whether it's two out of a hundred or three out of a hundred or something like that, but it's being patient. We had one LP that we closed towards the end of our fundraise that we hadn't heard for about a year, and that's despite regular updates, seeking meetings. But they came back to us after about a year of not hearing from them and said they were ready to engage and that they had tracked all the emails and all the updates and all the press releases. So that was really encouraging that the work got through. So I'd say to other emerging managers, the work gets through, and it's staying focused on what's important and knowing that you have a place in the market and that the market needs emerging managers.

I love it. So now looking forward, what are your goals for the next five to 10 years? As you build your firm, your strategy, where are you focused for the future?

First and foremost, invest Fund 1. From there, our goals are to raise a second fund that I suspect will largely track the same strategy, but perhaps with a greater mix of non-renewable energy assets. And at some point, expansion outside of the US. Adjacent capital solutions for the sustainable infrastructure industry are also on the radar, but first the horse, then the cart, I guess.

For sure. You touched on I think a great piece of advice, but in hindsight, is there anything else that you would share advice or otherwise with emerging managers thinking about going down this path?

It's worth it. Again, we may be emerging managers, but we're bringing fresh ideas, and that's how markets evolved. This means your role is key to the continued growth and innovation that's always been part of the capital market story. The capital solutions we're bringing are necessary for the growth of your industry. So it's from that perspective that I think we really get energized, and I'd recommend just be thoughtful about the long road ahead. It's going to be hard and going to be a lot of challenges and obstacles and times where it may not seem doable, but find great partners and teammates that help you get through those down cycles and put in the hard work knowing that you're needed to make the private markets better.

Fabulous. Well, Angel, we obviously go back many years and over different cycles and different places, so it's super exciting, and I'm very proud of what you and your co-founder have built. And really just want to thank you for sharing your story, joining me today on Fund Flow, sharing some great insights with the emerging manager ecosystem. And then also thank you to our listeners for joining us on this latest episode. We hope you join us next time. Thank you again, Angel.

Thank you, Jon. Really appreciate it. This was fun.

Thank you for joining us on this episode of Fund Flow. To learn more about today's discussion, please email host Jon Finger at jfinger@mcguirewoods.com. We look forward to hearing from you. This series was recorded and is being made available by McGuireWoods for informational purposes only. By accessing this series, you acknowledge that McGuireWoods makes no warranty, guarantee, or representation as to the accuracy or sufficiency of the information featured in this installment. The views, information, or opinions expressed are solely those of the individuals involved and do not necessarily reflect those of McGuireWoods. This series should not be used as a substitute for competent legal advice from a licensed professional attorney in your state and should not be construed as an offer to make or consider any investment or course of action.