As journalists, we have a reasonable amount of sympathy – even if we don’t always show it – for all the things that can go wrong when someone goes on the record with a genuine attempt at predicting the future.
So, in the spirit of reciprocity, we are going to go out on a limb and offer our own bold prediction: we think the 2020s will be infrastructure’s decade.
This is not meant as a crowd-pleaser to air high five each other about on Zoom. Rather, it’s our take on what we see as the confluence of two powerful sets of fundamentals: first, the fact that all the drivers already pushing investor interest in infrastructure remain firmly in place; and second, our belief that covid-19 is going to propel investor demand for essential hard assets to new heights.
Under the pre-existing drivers bracket, we are including the persistent low interest rate environment (and corresponding investor thirst for yield) that has boosted the asset class since the global financial crisis. Equally important are the historic investment opportunities offered by the energy transition and digitalisation of our societies. Covid has changed none of this and, in digital infrastructure’s case, has even given it a boost.
What the virus has done – and this may prove to be crucial for the asset class’s growth – is underline the ‘essential’ in essential assets, long one of infrastructure’s key selling points. Essential assets, many of which tend to fall on the core end of the spectrum, have always been prized for their defensive, recession-proof characteristics. Post-covid, though, we can see them taking on a new meaning: not just defensive, but literally the only assets able to function and generate yield, largely unaffected, during an economic shutdown.
It’s true infrastructure is not the only asset class offering essential hard assets. Agriculture – more nascent but also relatively unaffected by covid – offers several. Real estate – more established but also more rattled – does too, although we agree with Antin Infrastructure Partners’ Nicolas Mallet, who said: “In 2008 and 2009, a lot of money was moved into alternatives in real estate. I now don’t think real estate will play as big a role as it did then going forwards. As a result, I think a lot of money will come into infrastructure.” A recent Probitas Partners survey also shows declining interest in real estate.
Put simply, when we look across asset classes for essential hard assets able to function come rain or shine, infrastructure just seems to offer the biggest supply. Given what we’re going through, we’d wager more investors will want those in their portfolios (just ask Actis).
And if we’re wrong? Call us out in 2030.
*Or, better yet, come debate it with us at our upcoming Global Summit Online, on 12-15 October.