Infrastructure Investment Boom Driven by Tech and Energy Transitions

What's New

According to iCapital's Alternatives Decoded Q1 2025 report, global infrastructure assets under management have surpassed $1.1 trillion, with forecasts showing continued growth to $2.3 trillion by 2029. European markets currently represent the largest share of infrastructure AUM, while North American investment continues to accelerate.

Why It Matters

Infrastructure investments are attracting increased capital due to their inflation-hedging capabilities, low correlation to traditional assets, and consistent income generation. As inflation concerns persist and governments worldwide face aging infrastructure, private capital is stepping in to fill critical funding gaps.

Big Picture Drivers

• Policy support from major economies is accelerating with the U.S. Inflation Reduction Act projected to drive $4.1 trillion in energy infrastructure investment and European Union allocating over €1 trillion for infrastructure projects through 2027.

• Digital transformation is creating unprecedented demand with global data creation expected to grow more than 10x from 2020 to 2030, driving $49 billion in annual data center construction spending by 2030.

• Energy transition needs are massive with decarbonized power generation requiring $14 trillion in electric grid investments over the next 30 years to meet net zero scenarios.

• Funding gaps between projected infrastructure spending and society's actual needs will reach $15 trillion by 2040, creating significant private investment opportunities.

• Inflation protection characteristics make infrastructure particularly valuable, with the asset class outperforming during periods of moderate to high inflation.

By The Numbers

• Infrastructure AUM has grown to $1.1 trillion as of Q2 2024, projected to reach $2.3 trillion by 2029

• Annual global infrastructure spending needs total $3.2 trillion through 2040

• Private infrastructure investments delivered 9.6% annualized returns over 15 years with just 3.0% volatility

• Infrastructure correlation to global 60/40 portfolios is just 0.23, demonstrating strong diversification benefits

• Electricity demand from data centers, AI, and crypto expected to more than double to 1,050 TWh by 2026

Key Trends to Watch

• Data infrastructure demand will continue surging as AI adoption drives unprecedented power needs, creating investment opportunities in both data centers and supporting power infrastructure.

• Public-private partnerships will expand as governments worldwide lack sufficient capital to address growing infrastructure needs independently.

• Regional investment shifts may occur as Europe's early infrastructure investment advantage is challenged by accelerating North American capital deployment.

• Sustainability requirements will increasingly shape infrastructure investments as decarbonization efforts intensify globally.

The Wrap

Infrastructure represents a compelling investment opportunity offering inflation protection, low correlation to traditional assets, and defensive income characteristics. With significant global funding gaps and unprecedented technological transitions driving demand, private capital is positioned to capture attractive risk-adjusted returns while addressing critical societal needs.