Payal Vasa, Manager, Real Assets, Lonsec
While infrastructure itself is evolving as an asset class, we also note a change in investor behaviour. In the past, investors largely focused on core infrastructure: assets like toll roads and regulated utilities that provided steady, predictable income. However, strong demand for these assets has pushed valuations higher and yields lower. As a result, many investors are no longer satisfied with these return levels.
Instead, they are increasingly looking for higher returns, even if it means taking on more risk. This is showing up in greater allocations to core-plus and value-added strategies. These strategies may involve development exposure, operational improvements or assets with shorter track records, but they also offer the potential for better returns. More broadly, this reflects a shift in how infrastructure is being used in portfolios – from a purely defensive allocation to one that can also drive growth.
At the same time, the definition of infrastructure continues to evolve. While managers have historically taken different approaches, there is now more alignment around assets that offer durable, contracted (or near-contracted) cash flows and strong barriers to entry. This has expanded the opportunity set, but also added complexity.
With a wider range of assets and risk profiles, outcomes are becoming more varied. Not every investment will behave like traditional infrastructure, particularly as investors move further up the risk spectrum.
As a result, infrastructure investing is becoming more dynamic. Portfolios are being built with a mix of defensive and growth-oriented assets, rather than relying on one or the other. This shift is also increasing the importance of manager skill, as well as competition across the space.
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