Payal Vasa, Manager, Real Assets, Lonsec
Infrastructure has typically been used as a defensive part of portfolios, mainly for income and diversification. While that hasn’t changed, the role it plays is starting to broaden. It is now also being looked at as a source of growth, supported by a few clear long-term trends.
Digitalisation
At the forefront is the rapid expansion of digital infrastructure. The growth in AI and cloud computing has resulted in increased demand for assets such as data centres, fibre networks and connectivity platforms. This demand is less linked to economic cycles and more to a structural trend.
Electrification
Electrification represents another critical pillar. The global energy transition, combined with rising electricity demand from both digital infrastructure and industrial activity, is placing increasing pressure on existing energy systems. While renewables remain part of the story, there is more focus on transmission and storage: assets that are essential to making the system work and tend to have more stable cash flows.
Energy Security
Recent geopolitical tensions have bought energy security at the forefront. There is more emphasis on assets that support reliability and domestic supply. Governments and investors are increasingly prioritising assets that increase energy independence and the supply is more reliable. This has resulted in support to sustained investment in both traditional and transition-related infrastructure.
What this all means
Alongside these trends, we have also noted that the definition of infrastructure itself is broadening. The investable universe of managers now extends beyond traditional assets and includes streams like digital platforms and distributed energy systems.
While this expansion means increased opportunities for investment managers, it also introduces greater dispersion in risk and return outcomes, as not all assets exhibit the same defensive characteristics historically associated with the asset class. Infrastructure is no longer purely defensive. It represents a blend of income, resilience and growth, requiring a more considered approach to understanding underlying return drivers.
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