‘Monumental’ task has private infrastructure poised to surpass real estate in value

Private markets is clearly a rapidly growing part of the investment ecosystem, with the Australian Securities and Investments Commission (ASIC) recently citing data showing global private capital assets under management (AUM) having tripled over the past decade, to reach an estimated US$14.6 trillion ($23.2 trillion). And within that, infrastructure is the asset class that is streeting all others in terms of growth, driven by a colossal and multi-pronged funding task.

It can be difficult to get one’s head around the scale of the growth in private infrastructure as an asset class, Adam Reisler, partner at StepStone in the infrastructure and real assets team — which invests about $20 billion a year into private infrastructure — told The Inside Network’s Alternatives Symposium last month. But the remarkable surge of the asset class is only just getting started.

“Private infrastructure was barely noticeable in 2000s as a growing asset class, but it has been by far the fastest growing asset class over the last two decades. It is growing in size at about 25 per cent a year and it continues to grow, and the expectation over the next five years is that it will remain the fastest-growing private market asset class in the world,” said Reisler (pictured).

“In 2010, the asset class stood at about US$200 billion in assets under management (AUM), and now it’s close to US$1.5 trillion. And, frankly, over the next couple years, I think it’s very realistic to assume that it will “In 2010, the asset class stood at about US$200 billion in assets under management (AUM), and now it’s close to US$1.5 trillion. And, frankly, over the next couple years, I think it’s very realistic to assume that it will outpace both private debt and real estate. It’s pretty staggering to consider that this asset class, which didn’t really exist 30 years ago, will in the next couple of years be bigger than real estate.” Reisler is well aware that it “seems like hyperbole” to talk about some of the figures involved in the growth of private infrastructure, but contends that the amounts are both “staggering” and realistic. “It isn’t just the capital that’s flowing into the space, but the need for capital, and we’re nowhere close to being able to meet that need,” he told the symposium. “Whilst we’re seeing a growing asset class, it is still not keeping up with the demand for investment in infrastructure, on the back of the tailwinds and megatrends in play.”

Reisler said that the “monumental” task of funding the world’s infrastructure needs is being driven by a number of factors, including the need to replace ageing assets, the transition to net zero, and the need for digitalisation.

“We’re seeing a lot of capital being deployed into the space, but it’s not enough to meet the demand,” he said. “We’re seeing a lot of capital being deployed into the space, but it’s not enough to meet the demand. The reality is that we need to be investing about US$3 trillion a year into infrastructure just to keep up with the demand, and we’re nowhere close to that.”