Chart of the Week

Infrastructure assets are the networks and systems that provide essential services, ranging from roads and bridges to ports and airports, utilities, and power transmission, as well as pipelines, telecommunication towers, and data centers.

The growth and adoption of new technologies, including cloud computing and artificial intelligence (AI), as well as the transition to clean and renewable energy, will require significant capital outlays. The World Bank’s Global Infrastructure Hub estimated that $51 trillion will be needed by 2040 to accelerate energy transition and support the digital economy.

With growing government budget deficits and increasingly constrained public finances, we expect that private capital will play a greater role in infrastructure investments. According to Preqin, from 2020 to 2024, private infrastructure has raised $625 billion in capital and has accumulated $350 billion in dry powder that is ready to be invested.

As the chart shows, in the second quarter of 2024, private infrastructure reached nearly $1.5 trillion in assets under management. We believe this growth will continue and can offer attractive opportunities for long-term investors seeking relatively consistent returns that provide a hedge against rising inflation.

Alternative investments, such as hedge funds, private equity, private debt and private real estate funds are not appropriate for all investors and are only open to “accredited” or “qualified” investors within the meaning of U.S. securities laws.

Each asset class has its own risk and return characteristics. The level of risk associated with a particular investment or asset class generally correlates with the level of return the investment or asset class might achieve. Stock markets, especially foreign markets, are volatile. Stock values may fluctuate in response to general economic and market conditions, the prospects of individual companies, and industry sectors.

Alternative investments, such as hedge funds, private equity/private debt and private real estate funds, are speculative and involve a high degree of risk that is appropriate only for those investors who have the financial sophistication and expertise to evaluate the merits and risks of an investment in a fund and for which the fund does not represent a complete investment program. They entail significant risks that can include losses due to leveraging or other speculative investment practices, lack of liquidity, volatility of returns, restrictions on transferring interests in a fund, potential lack of diversification, absence and/or delay of information regarding valuations and pricing, complex tax structures and delays in tax reporting, less regulation and higher fees than mutual funds. Hedge fund, private equity, private debt and private real estate fund investing involves other material risks including capital loss and the loss of the entire amount invested. A fund's offering documents should be carefully reviewed prior to investing.

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