Like most other asset classes, private infrastructure weathered a slow transaction year in 2023. Inflation and rising interest rates exacerbated a valuation gap between buyers and sellers and froze many traditional credit markets. However, the uncertainty was also a time for a risk-based approach to infrastructure to shine. The value of an asset class that can serve as a potential hedge against both inflation and macroeconomic stress was on full display.
In 2024, we expect an increase in transaction activity as capital markets thaw and the valuation gap continues to narrow. We think infrastructure assets with entrenched customer bases, strong market positions, and contractual and regulatory protections provide both a downside cushion in uncertain economic times and a risk-mitigated, collateral-based way to buy exposure to secular trends with high growth potential. Value creation in the current environment has never been more important.
In this note, we discuss our expectations for the year ahead, including where we see thematic opportunities in our three key areas of focus: decarbonization, digitalization, and deconsolidation.