Global infrastructure requires significant capital

Industrial policy has had a resurgence in the U.S., Europe, Japan and India as countries invest in their physical and digital infrastructure. It is estimated that the average annual infrastructure need to maintain and upgrade traditional transport and utilities is $3.6 trillion. Many countries also have ambitious targets for net zero carbon emissions, which entails significant investment in renewable energy, the grid and EV charging infrastructure. Together, this creates a massive structural tailwind for demand for infrastructure assets.

Stable income and diversification have been elusive

Over the last decade, investors have dealt with extraordinarily low rates followed by higher rates but heightened volatility in bonds. In contrast, infrastructure has provided solid, consistent income over the same period (as highlighted in gray), as well as capital appreciation (blue) outside of significant economic downturns. In addition, it has exhibited low or negative correlation to public markets and less volatility relative to the U.S. bond market.

Inflation hedging is still a priority in portfolios

After a dramatic surge, inflation has made substantial progress toward the Fed’s 2% goal. However, some investors still worry aspects of inflation could be sticky, and in the long run, inflation is likely to settle slightly above the Fed’s 2% target. Relative to other asset classes, utilities have demonstrated strong inflation protection attributes historically.

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