The New Infrastructure Blueprint
A global opportunity
Taken together, these forces require an enormous amount of new infrastructure, from super batteries and hyperscale data centers to modern logistics hubs and upgraded airports.
We explore the major structural forces driving what’s poised to be a transformational moment in infrastructure investing. And we dive into the various ways capital can invest in the opportunities that we’re seeing today as well as the ones we’re expecting, and how investors can incorporate the asset class into their portfolios.
A changing world
Infrastructure sits at the intersection of the trends transforming the world we live in. It’s the cell towers and fiber internet that power the digitization of business and everyday life. It’s the new land, air and sea transportation facilities that support global supply chains as they reconfigure.
More broadly, it’s the new and upgraded infrastructure across transportation, energy, communication and other services required by a growing and urbanizing world population.
Many companies are seeking to reduce their dependencies on distant producers, shortening supply chains to bring them closer to their end consumers. Mexico is one of the nations that has benefited from this nearshoring trend.
Rapidly advancing technology will require more infrastructure, including new sources of energy.
Urban expansion means enhanced infrastructure across multiple sectors. Among other things, cities require more electricity, expanded telecommunications networks and essential water and sanitation systems.
Source: Ministry of Economy, Mexico, August 9, 2023.
Source: McKinsey analysis, January 2023, citing Synergy Research Group.
Source: World Bank, “Urban Development Overview,” April 3, 2023.
A new era for energy
An increasingly digital and urban population requires more electricity, while nations work to lower carbon emissions and strengthen their energy security.
The financing gap
Governments have traditionally built and maintained infrastructure, but with national debt tripling since the 1970s, it’s unlikely they can fund it alone. The situation requires a strategic pivot. And private investors are meeting this need, led by large pensions and sovereign wealth funds who are attracted by the stability, long duration and inflation-protected potential returns of infrastructure assets.
At the same time, for companies around the world infrastructure is just one of many demands on their resources – and is often not their core business consideration. A private investor can work with corporates, allowing firms to focus on their strategic priorities.
What it means for investors
The infrastructure moment is a growing opportunity for investors. It encompasses a wide range of investment options and sectors, and it can play a variety of roles within a portfolio.
A wide array of opportunities
Private investors have the chance to be at the center of a transformative period for essential infrastructure. The opportunities range from partnering with governments to build physical assets to joint ventures with infrastructure operators, as well as bespoke debt structures.
Diversification in a portfolio
Infrastructure has historically had a relatively low correlation to traditional asset classes due to its idiosyncratic characteristics – it typically doesn’t move in step with economic cycles and its service contracts are often inflation-linked.
Stable investment
As an asset class, infrastructure has traditionally been known for its stability. Many projects involve essential services that remain in demand regardless of economic conditions, and which generate steady, regular and predictable cash flows.
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