Infrastructure investing: 
A bridge to portfolio enhancement

We have 25 years of infrastructure advisory experience and 17 years of infrastructure investment management experience, including researching and executing on infrastructure and energy transition investment opportunities through funds, separate accounts, and co-investments. Located in key markets throughout the globe, our dedicated team can assist you with your infrastructure investing needs.

Investment opportunities through infrastructure

Private infrastructure is about far more than just bridges and roads. It is a growing and maturing asset class, including a broad range of assets from traditional power generators and utility providers to cutting-edge technology companies. The defensive nature of this asset class means investors have the potential to access more secure, asset-backed income. Many opportunities are also closely linked to positive social change.

The rise in remote working has pushed internet connectivity and logistics to the core of infrastructure portfolios. Data centers and warehouses have become essential assets, alongside utilities and transport. Renewable power, energy storage, energy transmission, utilities, transport and social infrastructure assets (such as schools and hospitals) are all investable as part of a diversified and sustainable portfolio.

Commons types of infrastructure opportunities

Cloud computing has become a central pillar of business operations. Data centres are now vital assets within digital infrastructure.

The rise of internet retail has thrown logistics into the spotlight, particularly when it comes to transporting essential goods. As a result, logistics warehouse have become an essential part of many urban areas.

Public transport is set to help combat climate change. New, more efficient trains, buses, ships, and aircraft will all play an important role.

Investing sustainably through infrastructure

Sustainability and infrastructure go hand in hand. Quality investments in this asset class typically consider environmental, social and governance (ESG) factors. Wind and solar farms, hydroelectric power generation and other sustainable energy sources will be essential to meeting the emission-reduction goals set by the Paris Climate Agreement. We believe high-quality assets should also be sustainable and resilient for the long-term. They should be able to withstand environmental pressures, such as extreme and unpredictable weather changes.

Allocating to these assets gives you access to a rapidly growing subsector of infrastructure while helping you meet your sustainability goals and comply with regulatory requirements.

ESG considerations are fully integrated into our manager research process, making it easy to see the extent to which asset managers take these factors into account. Our infrastructure specialists work closely with our impact investing and broader sustainable investing teams, sharing knowledge, offering insights and identifying appropriate opportunities.

Four macro themes in infrastructure investing

While there are many different types of infrastructure assets and several ways to allocate to them, many can be classified within four macro themes:
  • 1. Climate change and the energy

    Climate change comes with risks, but also presents opportunities for investors. There is a growing focus on and need for renewable energy (including wind and solar), new forms of transport with lower emissions and energy storage.
  • 2. Urbanisation and mobility

    As cities and other urban centres grow, their infrastructure must adapt to larger populations. Investment will most obviously be required in transport systems but also in other aspects crucial to urban living. Newer, more efficient residential developments will be required to house more people and support a healthy and sustainable society.
  • 3. Digitalisation, data and the internet

    Internet connectivity has become a fundamental foundation of modern society, and the related assets have become essential infrastructure. From high-speed internet connectivity in urban and rural areas to data centres and cloud computing, infrastructure supporting the digitalisation of the economy may be a key consideration in your portfolio.
  • 4. Demographics and ageing populations

    People are living longer, and populations in developed-market countries are ageing. Infrastructures will have to adapt to support the needs of these populations. This means more investment into healthcare infrastructure, such as hospitals and nursing homes, as well as appropriate transport systems that can support people with different mobility needs.

Managing risks when investing in infrastructure

Infrastructure’s unique nature means this asset class comes with its own risks. It's also subject to some of the same risks across private markets.

It may not always be possible to sell an asset at the time of your choosing. This is common across private markets assets and should always be taken into consideration when constructing a portfolio. Taking on liquidity risk can potentially bring additional return. Asset managers sometimes turn to the secondary market in search of liquidity. Speak to our dedicated secondary team to explore options appropriate for your needs.

It is always advisable to stagger investments over different years or “vintages”. Doing so could help smooth out portfolio return potential and mitigate the risk of your assets being affected by economic events. Building your portfolio over a period of three to five years allows it to be constructed across various points of an economic cycle.

When allocating to closed-ended funds, you do not have control over which assets the manager selects. Although you appoint infrastructure asset managers for their expertise in asset selection and management, there is still the risk that a manager may buy assets that deviate from how the strategy was marketed.

For larger, sophisticated investors, you can help mitigate this risk through co-investments, which can give you more discretion over the types of assets in which you want to invest. Speak to our dedicated co-investment team to find out if this option is right for you.

Many infrastructure assets have environmental footprints that must be managed. Regulations and legislation at a national and international level are putting serious pressure on areas such as oil and gas or conventional power generation. Failure to manage these risks at the portfolio-company level can bring serious reputational risk. You should also consider the risk of future regulatory changes that may negatively affect different sectors as the energy transition gathers pace.

Infrastructure assets are subject to different laws and rules depending on the jurisdictions in which they are located. Failing to comply with these can result in fines, restrictions, increased scrutiny, reputational damage and even the loss of operational license. These laws and rules can change over time. Your portfolio should be capable of managing this risk.

Our global manager research team has strong relationships with infrastructure asset managers and an in-depth knowledge of the nuances of different jurisdictions. We can help you navigate these issues and help to ensure that your portfolio is resilient and sustainable1.

Infrastructure assets are often complicated with unique characteristics. You should be confident that your infrastructure asset managers understand their portfolio companies and nuances.

Operating risk relates to a business or asset not functioning efficiently, whereas technical risk relates to design flaws or a resource management problem that can impair an asset’s ability to operate correctly. We believe that due diligence is essential for ensuring your infrastructure asset managers are prepared to handle such specific issues.

Selecting infrastructure investment opportunities

Infrastructure is a unique asset class that requires specialist knowledge and a long investment horizon. Assets could provide steady, reliable return potential across a wide variety of economic conditions, but structuring a portfolio to reap the benefits is not straightforward. We seek to develop a strategy that meets your investment goals based on the following considerations:

  • You can select open-ended or closed-ended vehicles – or a mix of both through a ‘program approach’ or fund-of-funds structure.
  • As with other areas of private markets, it is advisable to diversify your portfolio across asset types, geographies, risk profiles and vintages that could help you capture the highest quality opportunities as they come to market.
  • Structuring a capital deployment schedule is also important in infrastructure investing, ensuring you have money ready to invest when the managers call upon it. We can help you plan a strategy for investing appropriately and efficiently.
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