An all-weather asset class

Prominent investment firms such as KKR are particularly bullish on infrastructure assets in areas that provide essential services (i.e. water and electricity). This is because they anticipate prolonged inflation due to geopolitical tensions and energy transition challenges.

The investable universe of infrastructure

As an all-weather asset class, infrastructure is best used in a portfolio for counter cyclicality and downside protection. This is an asset class that performs, irrespective of whether GDP is expanding or contracting.

Looking ahead, there are two strong tailwinds that should favour infrastructure investors. These are generational tailwinds which are expected to last for the next 10 to 20 years:

Digitation and
Energy transition

Regarding digitisation, IP traffic is the fastest growing commodity in the world today. Over the next four years, approximately $3 trillion will need to be invested in data centres, telecom towers and fibre to the home as the world becomes increasingly more connected; driven in large part by innovations in artificial intelligence.

As for energy transition, onshoring of supply chains in recent times is driving the need for private capital investment. Clean energy production and electrification are dominant themes, both of which tie in with digitisation. Indeed, data centre energy demands are going to place evermore pressure on energy grids.

Combined, these trends present a huge investable universe for infrastructure investors and should create ideal conditions for increased deal flow.