Private Infrastructure: How to invest in the US$1 trillion asset class powering tomorrow's economy

5 minute read

Private infrastructure has transformed from a niche allocation for institutional investors into a US$1 trillion asset class. Institutional portfolios now allocate roughly 5% of their assets to infrastructure, up from 2% in 2010. That growth reflects something fundamental: the assets that move people, power economies, and transmit data aren't optional; they're essential.

Here's what you need to know about private infrastructure, its major growth drivers, why it matters for portfolio construction, and how you can access these opportunities.

What is private infrastructure and why is it essential for economies?

Infrastructure investing finances the backbone of modern economies and represents the physical assets that distribute people, goods, and resources. Private investors focus on economic infrastructure: real assets which charge for services, including toll roads, gas pipelines, or data centres. The revenue model is straightforward and the demand for these services is highly inelastic because they're essential regardless of market cycles.

Sectors within economic infrastructure include power generation and transmission, midstream assets like pipelines and storage, transportation infrastructure such as airports and ports, data and communications networks, and water and waste management systems. Each sector has distinct characteristics:

• Power and energy assets generate contracted cash flows through long-term agreements, often with built-in inflation adjustments. Traditional power still dominates, but renewable generation now represents the fastest-growing segment.
• Data and communications infrastructure has exploded with digitalisation. Data centre demand grows 10-12% annually from baseline cloud and streaming needs alone. Add AI's computational requirements, and that jumps to 15-20% annual growth.

• Transportation and logistics includes airports, seaports, rail networks, and toll roads. These assets combine steady usage fees with strategic positions that would be nearly impossible to replicate.
• Environmental services span water treatment, waste management, and emerging sectors like carbon capture. As regulations tighten globally, these assets become increasingly critical.

The key benefits of private infrastructure investing

Private infrastructure as an asset class offers stable income, inflation protection, and returns that move independently of traditional stocks and bonds. Understanding each component explains why institutions have steadily increased their allocations to this unique asset class.

Income forms a large portion of total returns in infrastructure investing. These assets generate cash flows from the essential services they provide: toll roads collect fees, power plants sell electricity, data centres charge rent. These revenue streams are contracted over long periods, providing predictable income.

Inflation protection is also a key characteristic of private infrastructure. First, many infrastructure contracts include explicit inflation escalators. Power purchase agreements frequently adjust prices annually based on changes in inflation, for example. Second, infrastructure assets are physical and expensive to replace. As construction costs rise with inflation, existing assets become more valuable simply because building new competing infrastructure would cost substantially more. This replacement cost dynamic provides inherent inflation protection.

Portfolio diversification benefits emerge from private infrastructure’s low correlation with other asset classes. Over the past decade, private infrastructure has posted a Sharpe ratio more than double that of private equity, meaning substantially better risk-adjusted returns. This is not just the result of lower volatility – private infrastructure assets often operate based on different return drivers than traditional assets like stocks or bonds. When public markets pull back based on market sentiment, infrastructure assets with long-term contracts continue generating cash flows.

The structural forces driving private infrastructure now

Three structural forces are driving growth across infrastructure sectors right now. These forces overlap and reinforce each other. AI infrastructure needs power, driving energy investment, which depends on modern transportation and logistics infrastructure:

• AI is reshaping power and data infrastructure at an unprecedented pace. Training a single large language model requires more electricity than 100,000 homes use annually. Microsoft alone is spending US$80 billion on data centres in 2025. The bottleneck here is power: data centres need massive, reliable electricity, and existing grids were not built for this surge. This creates opportunities across both data infrastructure and the power generation needed to support it.
• The clean energy transition requires replacing decades of fossil fuel infrastructure. The International Energy Agency estimates US$4 trillion in annual clean energy investment is needed through 2030 to meet climate targets. Wind and solar have achieved cost parity with traditional sources, but they need new grid infrastructure, battery storage, and smart management systems.
• Companies and governments are now investing in supply chain resilience: diversified manufacturing, expanded port capacity, modernised rail and trucking networks, and strategic warehousing. Overreliance on single-source suppliers, insufficient redundancy in transportation networks, and underinvestment in critical infrastructure created bottlenecks that persisted for years after the COVID-19 pandemic.

How to allocate for private infrastructure in your portfolio

Strategic asset allocation involves tradeoffs. Equities offer growth potential with higher volatility. Bonds provide stability. A 60/40 stock-bond portfolio represents the standard approach – enough equity exposure for long-term appreciation, enough fixed income to dampen drawdowns during market stress.

Private infrastructure, through its risk-return characteristics, offers an additional avenue for portfolio diversification. Over the past decade, infrastructure assets have delivered approximately 9.5% annualised returns with a Sharpe ratio of 1.58, which represents higher risk-adjusted returns. This stems from infrastructure's different sources of returns: its contracted cash flows, inflation-linked revenues, and physical assets. These don't move in lockstep with corporate earnings or interest rate expectations.

The lower correlation between private infrastructure and public markets creates this diversification effect. When equity markets fall on recession concerns, infrastructure assets with long-term contracts continue generating cash flows. When bond yields rise and fixed income suffers, infrastructure assets with inflation escalators increase prices to match rising costs. The underlying revenue streams from toll roads, power plants, and data centres operate independently of whether public markets are rising or falling.

Adding exposure to private infrastructure in a traditional 60/40 allocation can meaningfully improve risk-adjusted returns while providing downside protection during market stress. In the example below, a 10% allocation to private infrastructure increased returns from 8.69% to 8.99% annually over the past decade whilst reducing volatility from 11.13% to 10.25%.

Building your private infrastructure portfolio

Infrastructure investing has historically been the domain of institutional investors, and for good reason. Traditional private infrastructure funds require minimum commitments of US$5-10 million with capital locked up for seven to ten years. These constraints effectively shut out individual investors.

Semi-liquid private infrastructure funds address these liquidity and accessibility challenges by operating with significantly lower minimums and regular liquidity windows. This structure allows investors to capture infrastructure's long-term value creation while maintaining flexibility for their capital needs.

StashAway provides access to private infrastructure alongside our broader suite of private market opportunities, including private credit and private equity. To explore how private infrastructure can enhance your portfolio's risk-return profile, visit our website.