Infrastructure has become a significant asset class within private markets. According to Infrastructure Investor, over 500 private funds were seeking $464 billion of aggregate capital as of September 30, 2024. Also, a number of semi-liquid infrastructure funds have recently been launched by some of the largest private fund managers. Those funds are primarily targeting high-net-worth and mass-affluent investors. So, why is there a large demand for infrastructure assets by institutional and individual investors?
One reason is the growing need for capital to fund global infrastructure projects. In an often-cited report, Global Infrastructure Hub highlighted the gap between what governments plan to spend on projects and their financial ability to do so. This gap, estimated to be about $0.5 trillion per year, and growing, creates a significant opportunity for the private sector to invest.
Global Infrastructure Investment Forecast
Investors are willing to fund this gap because infrastructure assets often provide stable returns, inflation hedging, and lower correlation with traditional stocks and bonds. Additionally, private infrastructure can also provide greater diversification for investors. In a paper presented in October 2024, Brown, Lundblad, and Volckmann showed that, in the aggregate, private infrastructure funds have greater geographic and sector diversification than the comparable public market index.
While there are clear benefits to allocating a portion of an investment portfolio to infrastructure assets, the vast number of options available to investors makes their decisions complex. Investors face choices among strategies ranging from lower-risk “core” funds to higher-risk “opportunistic” ones, as well as sector-focused versus diversified, geographically specific versus global, and sustainability-oriented funds. Understanding the nuances of infrastructure investments is essential for making informed choices that align with individual goals and expectations.
Steve was formerly the Chief Investment Officer and Head of Private Markets at Manulife Investment Management. In this role, he was responsible for leading global investment teams across a wide range of asset classes, including private equity and credit, real estate, infrastructure, timber, and agriculture. Steve has served as a director of many public and private companies during his career, including two of Manulife’s U.S. SEC-registered investment advisors.
Important Notice: Private Markets Navigator does not provide investment advice, and the information should not be construed as such. Investing in private asset funds is risky, with potential for total loss and long-term liquidity restrictions. Read our full dislaimer.