Private Infrastructure Investments: What You Need to Know

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What is Private Infrastructure?

Attributes of Private Infrastructure Investments

Considerations for Investing

Related Insights

Continuing Education for Financial Professionals

WHAT IS PRIVATE INFRASTRUCTURE?

Infrastructure: The Building Blocks of Society

Infrastructure consists of the physical assets required for economies and societies to function, such as toll roads, bridges and railroads. Infrastructure investors provide the capital necessary to repair and build new infrastructure.

Infrastructure Investment Characteristics

1. Essential services supported by hard assets

2. Visibility of long-term cash flows

3. Contracted, regulated assets

4. Well-established market positions

5. Potential for inflation protection and stability through economic cycles

Infrastructure Sectors

Transportation

Digital Infrastructure

Power

Energy

Utilities

Industrial & Social Infrastructure

The Role of Private Infrastructure

Governments increasingly need private capital to repair and build new infrastructure.

The public funding gap — Source: G20 Global Infrastructure Outlook. As of March 2018. Note: “Infrastructure investment” is defined here as gross fixed capital formation by the public and private sectors on fixed, immovable assets that support long-term economic growth, and also includes maintenance and replacement costs. The estimate of investment need is based on an analysis of how much countries would have to spend if they wanted to match the performance of their best-performing peers by income group, controlling for economic and demographic differences and the quality of current infrastructures.

$15T
Infrastructure investment gap between what the world needs and what governments can be expected to spend based on current trends between now and 2040

Global Private Infrastructure Demand Drivers

There are four key forces supporting the growing demand for private-sector infrastructure investment.

DIGITALIZATION
DECARBONIZATION

DIGITALIZATION

Estimated compound annual growth rate (2018-2022) of global internet traffic is 30%¹

Infrastructure potential:

• Fiber optic networks

• Data centers

• Telecom towers

¹Source: Telegeography as of February 3, 2023.
DECARBONIZATION

Estimated size of the investment opportunity related to the transition to net zero emissions by 2050 is $200tn.¹

Infrastructure potential:

• Solar/wind technology

• Water/wastewater management

• Electric/gas assets

¹ Source: BloombergNEF as of December 7, 2022.

TRANSPORTATION
DECONSOLIDATION

TRANSPORTATION

Estimated growth in global passenger and freight transportation activity by 2050 will be approximately 79% and 100%, respectively.¹

Infrastructure potential:

• EV charging stations

• Electrical grid

• Public transit

¹ Note: Activity is measured in tonne-kilometers. Source: OECD International Transport Forum Outlook 2023.
DECONSOLIDATION

Some of today’s fastest-growing infrastructure sectors began as corporate carve-outs.

Infrastructure potential:

• Manufacturing

• Mining

• Chemicals

• Other industrial sectors

How Infrastructure Assets Generate Revenue

Cash flow from infrastructure depends on multiple factors.

ATTRIBUTES OF PRIVATE INFRASTRUCTURE INVESTMENTS

Private Infrastructure Investments Typically Seek to Deliver...

Potential for Downside Protection
A Potential Inflation Hedge
Meaningful Upside Opportunity

The essential nature of infrastructure’s asset base, with contracted yield, has historically provided downside protection.

Performance in 2022

Inflation-linked cash flows have allowed private infrastructure historically to outperform during periods of elevated inflation.

Above-Average Growth / Above-Average Inflation

Below-Average Growth / Below-Average Inflation

Below Average Growth / Above Average Inflation

Note: Analysis conducted on annual data between 2001 and 2022. "Above-Average Inflation" is defined as the year-over-year change in the US CPI greater than 2.5% and "Above-Average Growth" is defined as the year-over-year change in US real GDP greater than 2.0%. Analysis uses the Bloomberg Barclays Global Aggregate Index for Government and IG Corporate Bonds, MSCI World index for Global Stocks, and the Burgiss Global Infrastructure Index for Global Private Infrastructure (As of Q3 2022). Source: Bloomberg, Standard & Poor’s, Burgiss, KKR GBR (KKR Global Macro, Balance Sheet and Risk) Analysis, Bureau of Economic Analysis, Bureau of Labor Statistics.

Modern infrastructure can offer an opportunity to earn strong returns by investing behind the long-term shifts that fundamentally change the way people live and do business.

Infrastructure through the lens of “Net Zero”

Governments and companies have set aggressive targets
Net Zero Numbers

128 Countries and self-governing territories with net zero targets

19 Number of G20 countries with net zero commitments

235 Cities with net zero targets

702 Publicly listed companies with net zero targets = 1/3 of global public companies

Source: Net Zero Tracker as of June 2022.

Infrastructure through the lens of Net Zero

CONSIDERATIONS FOR PRIVATE INFRASTRUCTURE INVESTING

Private Infrastructure Investing: Risk vs. Reward

Infrastructure Investment Risk Considerations

Brownfield vs Greenfield Risk/Reward Implications

Identifying Different Types of Infrastructure Investments

Private Equity

Private equity involves investment in private companies with growth potential or private businesses that need financial restructuring with the intention of enhancing the value of the invested companies over time.
Learn More
Private Real Estate

Private real estate refers to investment in real estate properties that are privately owned and managed by individuals, partnerships, or private companies, rather than being publicly traded in the stock market.
Learn More
Private Credit

Private credit consists of investment in privately negotiated loans issued from non-bank lenders to middle market companies that are typically not publicly traded.
Learn More

When Fear Is a Friend – US Multifamily in Focus

Unlocking Infrastructure

Infrastructure: The Building Blocks of Society

Infrastructure Investment Characteristics

1. Essential services supported by hard assets

2. Visibility of long-term cash flows

3. Contracted, regulated assets

4. Well-established market positions

5. Potential for inflation protection and stability through economic cycles

Infrastructure Sectors

The Role of Private Infrastructure

Global Private Infrastructure Demand Drivers

How Infrastructure Assets Generate Revenue

Private Infrastructure Investments Typically Seek to Deliver...

The essential nature of infrastructure’s asset base, with contracted yield, has historically provided downside protection.

Inflation-linked cash flows have allowed private infrastructure historically to outperform during periods of elevated inflation.

Modern infrastructure can offer an opportunity to earn strong returns by investing behind the long-term shifts that fundamentally change the way people live and do business.

Private Infrastructure Investing: Risk vs. Reward

There are multiple factors to consider when evaluating the risk/reward profile of an infrastructure investment.

Whether an investment is existing or new has risk/return implications. Existing assets are known as “Brownfield;” new and planned assets are referred to as “Greenfield.”

Brownfield

Greenfield

There are several different types of infrastructure investments with different risk and return characteristics.

For Financial Professionals Only

Continuing Education: Introduction to Private Infrastructure

When Fear Is a Friend – US Multifamily in Focus

Unlocking Infrastructure

Infrastructure: The Building Blocks of Society

Infrastructure Investment Characteristics

1. Essential services supported by hard assets 2. Visibility of long-term cash flows 3. Contracted, regulated assets 4. Well-established market positions 5. Potential for inflation protection and stability through economic cycles

Infrastructure Sectors

The Role of Private Infrastructure

Global Private Infrastructure Demand Drivers

How Infrastructure Assets Generate Revenue

Private Infrastructure Investments Typically Seek to Deliver...

The essential nature of infrastructure’s asset base, with contracted yield, has historically provided downside protection.

Inflation-linked cash flows have allowed private infrastructure historically to outperform during periods of elevated inflation.

Modern infrastructure can offer an opportunity to earn strong returns by investing behind the long-term shifts that fundamentally change the way people live and do business.

Private Infrastructure Investing: Risk vs. Reward

Brownfield

Greenfield

For Financial Professionals Only

Continuing Education: Introduction to Private Infrastructure

1. Essential services supported by hard assets

2. Visibility of long-term cash flows

3. Contracted, regulated assets

4. Well-established market positions

5. Potential for inflation protection and stability through economic cycles