Investors have navigated a period of turbulence in recent months. While global markets have largely recovered from Donald Trump-induced volatility, significant uncertainty persists. For those seeking a safer yet rewarding home for their capital with potential upside, infrastructure warrants consideration. It is considered by many to be a “shock absorber when wider markets turn volatile”, says Steven Kibbel, financial planner and chief editorial adviser at Gold IRA Companies. Moreover, the sector benefits from “strong fundamentals”, and listed companies and funds appear attractively valued, both historically and relative to global equities, says Emily Foshag, manager of the Principal Asset Management Global Listed Infrastructure Fund.
Emerging markets power demand for infrastructure
A “massive” catalyst propelling demand for infrastructure is robust economic growth in emerging markets, which have outpaced developed nations for decades, according to Varun Jain, chief revenue officer at index provider BITA. These economies now account for more than half of global economic growth, a figure projected to reach 65% by 2035, with S&P Global Market Intelligence forecasting an average annual growth rate of around 4% over the next decade, compared with 1.6% for developed economies. Asia, Latin America and Africa are estimated to need about $6.5 trillion in infrastructure investment by 2035.
This growth is especially expected to stimulate infrastructure investment in urban centres as rural populations migrate to cities, says Thuy Quynh Dang, portfolio manager of the Global Listed Infrastructure Fund at Cohen & Steers. Rising living standards will also fuel demand for enhanced services, spanning water supplies to reliable roads and faster broadband. Furthermore, the burgeoning middle class in emerging markets will drive demand for airport infrastructure as international travel becomes more accessible.
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However, capitalising on the emerging-market infrastructure boom is easier said than done, says Quynh Dang. Many emerging nations impose restrictions on utility operators, and heightened political instability elevates asset risk. For investors favouring direct stock market investment over funds, the limited number of listed emerging-market utilities, currently accounting for only around 15% of the listed infrastructure market, poses another hurdle.
Nevertheless, Quynh Dang believes this is evolving as governments in emerging markets “increasingly look to attract foreign private investment”, leading to clearer regulatory frameworks for utilities “in order to increase their attractiveness to foreign capital”. Consequently, investors can now invest directly “in everything from ports in Brazil to airports in Mexico and Thailand”, a recent development. With a growing pipeline of flotations, she anticipates that emerging-market infrastructure companies will constitute a significantly larger portion of the market in the near future.
Developed nations get building again
Infrastructure spending is also poised for substantial growth in developed economies. Over the past 15 years numerous Western governments, including the UK and many European nations, have sought to reduce their deficits by cutting infrastructure expenditure, says Vincent Gerritsen, head of private markets for the UK and Europe at Morrison & Co. This approach may have offered short-term fiscal relief, but has resulted in inadequate maintenance of legacy infrastructure.
The consequences of this neglect are increasingly apparent. “It’s brought home to me every day when I virtually have to slalom through London’s potholes,” says Gerritsen. Similarly, William Rhind, CEO of GraniteShares, finds the recent blackouts in Spain and Portugal unsurprising, given that “one third of electricity grids in Europe are over 40 years old”. Consequently, Jain notes, a widespread consensus is emerging that infrastructure in many developed countries needs an urgent “reboot” to sustain economic growth.
Encouragingly, many nations are recognising the counterproductive nature of past austerity measures and are working on ways to reverse this. Public-private partnerships, where governments collaborate with private operators on asset construction with long-term operating contracts, offer one solution, says Jain, citing the £2.2 billion modernisation of Gatwick Airport in the UK as an example.
Another strategy involves the sale of older assets to private firms to generate funds for more modern infrastructure development.
However, some countries are adopting a more direct fiscal approach. Germany stands out, having rewritten its long-standing debt brake rules, primarily to boost defence spending, but also creating a €500 billion extra-budgetary fund for additional infrastructure investment. Even bond ratings agencies, typically wary of increased spending, lauded the move as positive for Germany’s competitiveness, observes Jon Cunliffe, head of JM Finn’s investment office.
Digitalisation generates new demands
Beyond emerging-market growth and the need to upgrade ageing infrastructure in developed nations, the expansion of the digital economy – which “cuts across various sectors and is significantly dependent on infrastructure”, says David Bloom, chairman of data-centre company Kao Data – will further fuel infrastructure spending. Accelerating digitalisation “creates a substantial demand for foundational infrastructure, such as data centres and telecommunication networks”. This gives rise to a “virtuous circle”, where “robust digital infrastructure fuels economic growth”, which in turn further amplifies demand for infrastructure, notes Kao.
Data centres, which store, process, and distribute data, form the core backbone of the digital revolution, says Richard Sem of the Pantheon global infrastructure and real assets investment team. Even before the rise of artificial intelligence, they were benefiting from the growth of cloud computing and mobile gaming. However, the billions being invested by firms in developing sophisticated computer models have further amplified demand.
Beyond physical buildings and hardware, data centres also require immense energy resources. The electricity consumption of data centres alone “has shot through the roof”, notes Sem. Indeed, the anticipated energy demands are so substantial that several countries are considering the approach taken by Ireland, which “has effectively banned them from the national grid, forcing them to provide their own power”. Many data centres have little alternative, as “in some parts of Europe it takes up to three years for them to be connected to the grid”, Rhind notes. This creates opportunities for power-generation facilities directly linked to data centres.
However, AI and cloud computing are not the sole drivers of “exponential growth” in demand for power, says Ben Pritchard, CEO of AVK, a power provider for data centres. The so-called “internet of things”, where interconnected devices communicate with each other, will also escalate the need for investment in digital infrastructure and generate “an exponential growth” demand for power. Matters are further complicated by the fact that there is an increasing “expectation that this growth must be achieved sustainably”.
The clean-energy transition
The imperative for sustainability extends beyond digital infrastructure. While acknowledging that opposition from the Trump administration and some governments’ scaling back of carbon-emission reduction targets might make the transition to clean energy “a little slower than we’d like”, Charlie Wright, co-lead investment manager for Foresight Environmental Infrastructure, believes that “the overall move to a greener and more sustainable economy is impossible to dispute”.
This transition will involve more than simply replacing fossil fuels with renewables. “It has become clear over the past decade that you also need to update the grid infrastructure in order to reflect the new model of energy production,” Wright points out. Many countries’ power grids will require redesigning “from ones that are built around large-scale power generators to those that serve a collection of smaller-scale wind and solar farms”. In 2023, the International Energy Agency estimated that around 1,500GW of renewables projects were waiting to be connected to the grid, and warned that annual global investment in power grids needed to double to $600 billion by 2030 to have any hope of limiting global warming to 1.5˚C.
Infrastructure investment related to the energy transition extends offshore. Colin Ross, chief strategy officer of Ashtead Technology, a subsea technology specialist, notes that offshore wind already constitutes a significant portion of renewable-energy production in countries such as the UK. With nations such as Taiwan also making substantial investments, offshore wind capacity is growing by around 30% annually. All of this “will need to be installed, maintained and eventually decommissioned when the wind turbines reach the end of their life”, says Ross. Legacy oil and gas infrastructure will also need to be decommissioned and removed.
Overall, the green transition necessitates investments across the spectrum, from building renewable plants and enhancing energy storage to upgrading grid connections. To appreciate the scale of it, just consider that “two electric cars use the same amount of electric power as a house”, says Nick Langley, a portfolio manager at ClearBridge Investments. Langley’s team estimates that “enormous sums” of up to $100 trillion will need to be invested over the next quarter-century to achieve net-zero targets. Indeed, “some think tanks estimate that even more will need to be spent”.
Infrastructure as a defensive play
There are two primary avenues for infrastructure investment: companies that manufacture and install assets, and those that own and operate them. Jags Walia, head of global listed infrastructure at Van Lanschot Kempen Investment Management, favours the latter, particularly for more defensive investors. This preference stems from the typically long-term contracts held by asset operators, providing greater certainty regarding their cash flows. Such stability is especially valuable at a time when even countries such as the United States are becoming “a much less predictable business environment”.
By contrast, companies that “come around and deliver a new screwdriver for an infrastructure project and then go away again” face greater uncertainty over their income due to their reliance on market supply and demand dynamics and competition, explains Walia. Currently, many executives at manufacturing and engineering firms “are wondering whether the supply chains of their firms are going to be hit by yet another round of tariffs and trade restrictions”, making them less attractive and riskier investments.
Emily Foshag largely concurs, noting that most infrastructure operators tend to be natural monopolies with significant pricing power, which enables them to pass on cost increases to consumers. While such “core infrastructure” is typically heavily regulated, most regulatory agreements globally include mechanisms for adjusting consumer prices to reflect changes in inflation. However, while Foshag strongly prefers operators over manufacturers or installers, she believes all segments of the industry will benefit from the “structural tailwinds” driving demand for infrastructure, making it a less risky investment than those in other sectors. After all, in the medium term, “the energy transition, demographic shifts, digitalisation” and innovation in technology are all set to proceed “regardless of what happens in the wider economy”. For the most optimal ways to capitalise on this theme, see below.
Infrastructure investments to consider buying now
For straightforward exposure to the infrastructure sector, consider the iShares Global Infrastructure UCITS ETF (LSE: INFR). This exchange-traded fund tracks the FTSE Global Core Infrastructure index, focusing on the largest listed infrastructure companies globally.
Utilities comprise roughly half the portfolio, alongside industrial and energy companies and real-estate investment trusts. Top holdings include US and Canadian renewables firm NextEra Energy (NYSE: NEE) and pipeline operator Enbridge Inc (NYSE: ENB). The portfolio’s price-to-earnings ratio stands at 18.2%, with a total expense ratio of 0.65%.
An actively managed alternative is the Kempen (Lux) Global Listed Infrastructure Fund. Managed by Jags Walia, it targets listed companies deriving at least 70% of their income from operating infrastructure assets. The fund prioritises firms with inflation-linked contracts and relatively short capital-expenditure cycles, offering greater resilience against economic downturns. Since its inception in 2019, the fund has outperformed its benchmark, the FTSE Global Core Infrastructure 50/50 index. The ongoing charge is 1%.
Pantheon Infrastructure (LSE: PINT) is an investment trust with a diversified portfolio of high-quality global infrastructure assets across North America, the UK, and Europe. Holdings range from a North America data-centre company to NGGT, which owns and operates the UK’s regulated national gas-transmission system, and an independent gas-metering business. Pantheon trades at a 16.9% discount to its net asset value, with an ongoing charge of 1.31% and a dividend yield of 3.6%.
Another noteworthy investment trust is Foresight Environmental Infrastructure (LSE: FGEN). Foresight concentrates on clean energy and decarbonisation infrastructure projects in the UK and mainland Europe, currently holding 41 assets with a total capacity of 359.5 MW. Its portfolio is primarily invested in wind, waste, and bioenergy, but also includes anaerobic waste and solar-energy projects, charging stations, sustainable agriculture, and hydropower. Foresight offers an attractive dividend yield of 10.6% and trades at a discount of around a third to its net asset value.
For individual company exposure, consider Sacyr SA (Madrid: SCYR). Sacyr operates across three main divisions: infrastructure construction, infrastructure operation, and desalination (a crucial area given increasing global water scarcity). The company is involved in diverse projects, from toll roads to airport construction. The firm has headquarters in Madrid, but generates most of its revenue from Latin America, particularly Colombia and Chile, and is the second-largest construction firm in the region. It currently trades at 13.1 times its estimated 2026 earnings, with a dividend yield of 3.7%.
Another company poised to benefit from the growing emphasis on decarbonisation and energy security is Ashtead Technology Holdings (LSE: AT.). Ashtead provides and leases equipment for the offshore energy industry, serving both offshore wind and oil and gas projects globally, including the decommissioning of obsolete oil and gas rigs. Leveraging its strength in this niche but vital sector, the company has seen its revenue more than triple between 2019 and 2024, with returns on capital employed of around 15%. Despite expectations of continued strong growth, Ashtead trades at a modest 9.5 times its estimated 2026 earnings.
This article was first published in MoneyWeek’s magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.
