Themes of the Year: Covid-19 changes the world

As the pandemic surges this winter, we look back at how it’s impacted the asset class and what's in store as we head into 2021.

Every year, we finish with our traditional holiday coverage looking back at what we see as the biggest themes of the year. In that sense, 2020 is no different, and we will be doing just that starting today. The key difference, of course, is that this year there is one theme that pulls every other into its powerful gravitational orbit: covid-19.

Sidestepping the rabbit hole of whether covid-19 was a white swan, a black one, or some shade of grey in between, one thing is certain: if you had asked most people in January whether they expected to be in lockdown by March – their freedom of movement and ability to see family and friends severely curtailed – they would have probably laughed you out of the room. And yet, just three short months after the year started, life changed drastically for billions of people across the globe.

While infrastructure is generally seen as an uncorrelated asset class it is not unmoored from reality. In that sense, covid has inevitably impacted it, even if that impact has been uneven, with some sub-sectors hit harder than others. Overall, though, infrastructure has proven itself resilient to the pandemic, confirming its essential nature, a long-prized characteristic that is likely to be valued even more by investors going forward.

We will be exploring some of the winners and losers in more detail with some of our forthcoming Themes of the Year, but by now the general contours are known. While there is considerable nuance, it’s fair to say that airports have been hit the hardest as a sector, and will likely take until as late as 2024 to recover to pre-pandemic levels, according to some estimates. So far, though, regulators, lenders and sponsors seem to have bandied together to help keep these assets afloat, though there’s no denying many are in crisis mode. Other corners of the transport sector, like roads, have fared better, however, with many having bounced back strongly already.

Digital infrastructure has been thrust into the mainstream of infrastructure investing, a burgeoning sector that is also hotly contested by other asset classes like real estate and private equity. Renewables have held up well too, and are looking like beneficiaries of government efforts to ‘build back better’, even if there is wariness on whether some economies will disregard climate change as they look to recover to pre-pandemic levels of growth.

Infrastructure debt is threatening to come into its own as an asset class, with more and more institutions eyeing it hungrily, something you can see in the number of debt strategies that have proliferated this year. And promising sectors like healthcare are feeling the glare of the spotlight, with infrastructure managers making a good case for themselves as better stewards of these assets.

Finally, unlisted fundraising has remained robust, with the first nine months of 2020 defying all the odds and ending with a total of $78.5 billion raised, thus becoming the second strongest Q1-Q3 period since 2015.

All of which indicates infrastructure has not only survived its encounter with covid-19, but is looking in relative good health as we head into 2021. Given what an awful year 2020 has been, that is already more than anyone could hope for.