Infrastructure Secondaries – Institutional

Infrastructure Secondaries is taking off

Following the rapid growth seen in the infrastructure market over the last decade, secondaries are now the fastest growing sub-segment within the asset class – in short: Infrastructure secondaries are taking off.

Read the full paper Read the full paper

Infrastructure primaries of today, secondaries of tomorrow

The time for infra secondaries is now. We see infrastructure secondaries reaching new heights in the coming years.

We explore how secondary investors will be presented with opportunities that are interesting from both a risk-adjusted return and a portfolio construction perspective.

Why infrastructure secondaries

Infrastructure secondaries not only provide the traditional benefits of secondary investments, but also offer additional distinct benefits specific to the infrastructure asset class.

Infrastructure characteristics

Infrastructure assets typically have inflation-linked revenues and pricing power along with stable, recurring cash flows from providing essential services further reinforced by high barriers to entry.

Undercapitalized market

Relatively nascent phase resulting in a buyer-friendly gap. Small- and mid-sized transactions tend to fly under the radar, offering the potential to be selective.

Yield enhancement

Secondary transactions offer immediate yield from as early as day one. Moreover, the chance to buy assets at a discount or opt for a deferred payment structure can mechanically boost yield.

Infrastructure characteristics

Infrastructure assets typically have inflation-linked revenues and pricing power along with stable, recurring cash flows from providing essential services further reinforced by high barriers to entry.

Undercapitalized market

Relatively nascent phase resulting in a buyer-friendly gap. Small- and mid-sized transactions tend to fly under the radar, offering the potential to be selective.

Yield enhancement

Secondary transactions offer immediate yield from as early as day one. Moreover, the chance to buy assets at a discount or opt for a deferred payment structure can mechanically boost yield.

Infrastructure is just beginning to catch up

Transacted infrastructure market pricing

BlackRock, Campbell Lutyens Infrastructure Market Report H2 2023 and H1 2024 Secondary Market Overview, Evercore Private Capital Advisory H1 2024 Secondary Market Review, as of August 2024.

The formation and development of a secondary marketplace is recognized as a natural progression for illiquid asset classes, as seen in the maturation of more established alternative strategies such as private equity & real estate.

In the past 10 years, LP-leds have accounted for approximately half of transactions, with GP-leds accounting for the other half. LP-led secondary investments are typically acquired at a discount to NAV, which can drive immediate uplift. Furthermore, pricing is often based on a historical reference date valuation, which may be stale at the point of acquisition. This results in an effective discount that is often higher than the optical discount, which can be further enhanced through the use of deferred payments.

Read the full paper now Read the full paper now

The time is now

Infrastructure secondaries can play a variety of roles within a portfolio, for both new and existing infrastructure investors alike.

As infrastructure secondary penetration rates begin to catch up to the levels seen in private equity in the early 2000s, transaction volumes are expected to ascend to new heights in the coming years. As these conditions persist, we anticipate secondary buyers to be presented with attractive investments at compelling prices. The time is now.

There are several ways for investors to engage with infrastructure secondaries. Institutional & high-net-worth investors can access infrastructure secondaries opportunities via LP-led, GP-led secondaries or bespoke structured solutions, through private funds or separately managed accounts.

Sign up to receive BlackRock's insights on private markets

First name *

Last name *

Business Email *

Organization Type *

Title *

Organization *

Location *

Please click here to opt-in to receiving insight emails from BlackRock. Any data collected will be processed according to BlackRock's privacy policy. You may unsubscribe at any time.

*Required information | Read our Privacy policy

Thank you for reaching out!

A BlackRock representative will reach out shortly. In the meantime, explore our website to read insights on the markets, portfolio design and more.

Explore our insights hub

Infrastructure Secondaries: Taking Off

Infrastructure primaries of today, secondaries of tomorrow

Why infrastructure secondaries

Infrastructure is just beginning to catch up

The time is now

Authors

Sign up to receive BlackRock's insights on private markets

Thank you for reaching out!

Explore more

Corporate

Legal