Infrastructure continues to loom large for wealth managers as geopolitics and business imperatives combine. A new study from Boston Consulting Group about the investment funds sector lifts the lid on what's going on.

The European Union’s recently unveiled plans to unlock nearly €800 billion ($873 billion) to bolster security (see a related story); it is also likely to be a big boost for infrastructure. This keeps the asset class in the frame for wealth managers.

And beyond military and security areas, developed and developing nations continue to spend heavy sums on everything from power grids to fixing roads.

Boston Consulting Group examines the asset class in its recently-published annual overview of infrastructure. BCG finds that infrastructure assets under management continued to grow in 2024 to a record of $1.3 trillion as of June 2024. Nevertheless, fundraising is below its 2022 peak, reflecting lingering investor caution.

The report examines areas such as energy – traditional (fossil fuels, nuclear, hydro) – and alternative and renewables (solar, wind, biomass, geothermal, other); airports; ports; roads; bridges; tunnels; data centres, charging points for electric vehicles; broadband networks; mobile phone towers; warehousing; social infrastructure such as student housing; schools; medical facilities; and hospitals. As technology evolves – AI, for example – the number of categories increases. 

An industrial warehouse

The BCG annual Infrastructure Strategy Report highlights a shift in investor focus, with greater allocations to high-growth sectors such as digital infrastructure and energy transition. Data centre investments, driven by AI and cloud computing demands, have been particularly strong, with a record $50 billion allocated to the sector in 2024, up from $11 billion in 2020.

“Infrastructure remains a cornerstone of private investment strategies, offering stability and inflation protection in volatile markets,” BCG managing director and senior partner Wilhelm Schmundt, the firm’s global lead for infrastructure investment and the report's co-author, said. “As investors adjust to a maturing market, we see significant opportunities emerging in energy transition, digital infrastructure, and new investment structures designed to attract capital.”

Mostly on the up

The report takes a broadly optimistic tone.

“Although the past two years have seen a considerable slowdown in fundraising and deal volume, we believe that the situation will return to historical patterns. Beyond improving macroeconomic conditions – including stabilising or declining interest rates in some regions – the fundamental need for infrastructure remains significant across the globe,” it said. “Core sectors such as energy, transport, and logistics continue to require major investments if they are to support economic growth, modernisation, and resilience. By 2040, according to the G20’s Global Infrastructure Hub, the gap between required infrastructure investment and current spending trends will stand at $15 trillion and will continue to widen as the world’s population grows, urbanisation increases, and further economic development occurs.”

Wheeling and dealing
Wealth managers are taking note. In January 2024 asset management titan BlackRock announced that it had acquired Global Infrastructure Partners (GIP). In December 2023, Middle East alternative investment firm Investcorp bought a 50 per cent stake in the $4.8 billion infrastructure business of US firm Corsair Capital, to give another example. For years, Australia's Macquarie has been a big player in the space. Politicians of all parties say they want to improve infrastructure. In July 2024, Vontobel, the Switzerland-based wealth and investment manager, completed its purchase of a “significant minority stake” in Ancala Partners, an infrastructure investment business based in London. Amundi bought Alpha Associates in 2024; other 2024 deals included Bridgepoint Group's purchase of Energy Capital Partners; Commerzbank's Acquila Capital purchase; General Electric's acquisition of Actis, and EnTrust's purchase of OMP Capital.

But for all the noise and dealmaking, infrastructure isn’t immune to macro-economic shifts, such as the rise in interest rates after the pandemic, or geopolitical worries caused by Russia’s invasion of Ukraine, disruptions to shipping in the Red Sea because of attacks on vessels, tariffs from the US, and other forces. 

There are also political risks when governments change the bidding process for contracts, for example, or if investment returns disappoint and there are arguments about service delivery. In the UK, some investors remember controversies around the Private Finance Initiative (PFI), a way in which private money was used to help pay for projects such as new schools and hospitals. 

In the US, much infrastructure is paid for out of municipal bonds. A variety of instruments are used by governments around the world, with varying levels of support by the public sector, such as inflation-adjusted contracts. For this reason, infrastructure can be attractive to family offices, pension funds and insurers looking for what they hope are long-term, steady returns to match against expected liabilities. 

Infrastructure taps into wealth management’s ability to provide “patient capital.” This is the idea that certain sources of capital can, because of the way they are structured, wait for years to see returns.

Findings 
The BCG report said that infrastructure funds raised $87 billion in 2024, a 14 per cent year-over-year increase from 2023, but still 43 per cent below 2022 levels. Transactions in the asset class fell by 8 per cent in 2024, following a 19 per cent drop in 2023. However, large-scale deals in digital infrastructure and energy transition signal a potential rebound, authors of the report said. The average deal size is trending below the 2023 mark and is 40 per cent below the peak reached in 2021.

Although traditional energy investments remain essential, renewable energy and battery storage solutions continue to attract investor interest. AI-driven demand has made data centres one of the fastest growing infrastructure asset classes.

BCG said infrastructure investors are refining their strategies to remain competitive in an evolving market. For example, mergers and acquisitions are an important tool for general partners and some GPs want to be “one-stop-shops” for infrastructure investments across the entire asset class. Others are pursuing deals to strengthen their niche, geographic, or sector focus, reinforcing both broad-based and specialist strategies.

“Private investment will be critical to modernising infrastructure and meeting the world’s growing connectivity and energy needs,” said Alex Wright, BCG managing director and partner, and a co-author of the report. “With capital deployment expected to accelerate in 2025, we anticipate a more dynamic investment landscape, particularly in AI-driven infrastructure, renewables, and smart grids.”