WHAT IS PRIVATE INFRASTRUCTURE?
Infrastructure: The Building Blocks of Society
Infrastructure consists of the physical assets required for economies and societies to function, such as toll roads, bridges and railroads. Infrastructure investors provide the capital necessary to repair and build new infrastructure.
Infrastructure Investment Characteristics
1. Essential services supported by hard assets
2. Visibility of long-term cash flows
3. Contracted, regulated assets
4. Well-established market positions
5. Potential for inflation protection and stability through economic cycles
Infrastructure Sectors
The Role of Private Infrastructure
Governments increasingly need private capital to repair and build new infrastructure.
$15T
Infrastructure investment gap between what the world needs and what governments can be expected to spend based on current trends between now and 2040
Global Private Infrastructure Demand Drivers
There are four key forces supporting the growing demand for private-sector infrastructure investment.
How Infrastructure Assets Generate Revenue
Cash flow from infrastructure depends on multiple factors.
ATTRIBUTES OF PRIVATE INFRASTRUCTURE INVESTMENTS
Private Infrastructure Investments Typically Seek to Deliver...
- Potential for Downside Protection
- A Potential Inflation Hedge
- Meaningful Upside Opportunity
The essential nature of infrastructure’s asset base, with contracted yield, has historically provided downside protection.
Performance in 2022
Inflation-linked cash flows have allowed private infrastructure historically to outperform during periods of elevated inflation.
Above-Average Growth / Above-Average Inflation
Below-Average Growth / Below-Average Inflation
Note: Analysis conducted on annual data between 2001 and 2022. "Above-Average Inflation" is defined as the year-over-year change in the US CPI greater than 2.5% and "Above-Average Growth" is defined as the year-over-year change in US real GDP greater than 2.0%. Analysis uses the Bloomberg Barclays Global Aggregate Index for Government and IG Corporate Bonds, MSCI World index for Global Stocks, and the Burgiss Global Infrastructure Index for Global Private Infrastructure (As of Q3 2022). Source: Bloomberg, Standard & Poor’s, Burgiss, KKR GBR (KKR Global Macro, Balance Sheet and Risk) Analysis, Bureau of Economic Analysis, Bureau of Labor Statistics.
Modern infrastructure can offer an opportunity to earn strong returns by investing behind the long-term shifts that fundamentally change the way people live and do business.
Infrastructure through the lens of “Net Zero”
Governments and companies have set aggressive targets
Net Zero Numbers
128 Countries and self-governing territories with net zero targets
19 Number of G20 countries with net zero commitments
235 Cities with net zero targets
702 Publicly listed companies with net zero targets = 1/3 of global public companies
Source: Net Zero Tracker as of June 2022.
CONSIDERATIONS FOR PRIVATE INFRASTRUCTURE INVESTING
Private Infrastructure Investing: Risk vs. Reward
Explore Other Private Market Asset Classes
Dig deeper into three other private market asset classes to learn what they are, why they matter, and how they may fit within existing portfolios.