The Evolving Opportunity in Infrastructure Debt
In addition to infrastructure debt’s defensive nature, diversification benefits and potential to offer compelling risk-adjusted returns, infrastructure’s “essentiality” underscores its appeal throughout the economic cycle.
Infrastructure: Essential and Evolving
In today’s quickly evolving global economy, many institutional investors have turned to infrastructure debt for potential benefits ranging from an illiquidity premium over public markets to enhanced diversification, risk protection and asset-liability matching characteristics. Amid often varying definitions of infrastructure debt among managers, banks, and investors, at Barings the definition centers on the type of asset generating the cash flow, with an emphasis on essential assets that meet key social or economic needs and that have the potential to offer stable, long-term cash flows. In our view, today’s evolving infrastructure universe encompasses six broad categories:
Economic Infrastructure
- Transportation-related strategic assets such as toll roads, seaports, airports, railroad rolling stock
Utilities and Pipelines
- Regulated or unregulated distribution and transmission assets, which typically carry water, sewage, electricity, natural gas, and other fuels
Power Generation
- Renewable energy generation assets (solar, wind or hydro), batteries, and EV charging infrastructure
Social Infrastructure
- Government-sponsored public-private partnerships and social housing, and development of hospitals, parks, government buildings and schools
Midstream and Storage Facilities
- Commodity product storage, energy, and non-energy assets
Digital Infrastructure
- Towers, fiber cabling and data centers in well-understood markets or regimes
