After US-based assets manager KKR announced the close of its £14.3 billion ($19 billion) Global Infrastructure Investors V fund last week, Anish Butani at London-headquartered bfinance shares his insights on the outlook and megatrends driving private infrastructure investment.

“Infrastructure is proving to be a resilient asset class, even in an increasing interest rate environment,” Anish Butani (pictured), managing director and head of infrastructure at investment consultancy bfinance told this news service yesterday in an interview. “It is delivering positive returns and acts as a hedge against inflation. It is also insulated from economic growth while private equity is more geared towards GDP growth.”  

Butani singled out digitalization, AI, electrification, industrial reshoring, demographics, and energy security as the megatrends driving the asset class. “With higher geopolitical uncertainty, it is important for countries to deliver their own energy. In Europe, this provides a greater case for renewable energy, making it less reliant on oil and gas imports, at the same time as addressing the decarbonization agenda,” he continued. “Infrastructure also has a role to play with an aging population, driving the need for care homes, for instance.”

Although New York suspended the construction of major data centers recently, blaming their high consumption of energy and water, Butani, in line with a number of investment managers, remains positive about the outlook for the asset class. He highlighted how firms in Scandinavia, for instance, are finding sustainable solutions to water and liquid cooling, driven by demand for AI infrastructure and strict environmental regulations.

This has been echoed by Mark Brennan, portfolio manager of Guiness Real Assets Fund who thinks that data centers are becoming more environmentally efficient, although there will be regions where deployment is delayed.

Butani's statement comes after New York-headquartered KKR announced the close of its £14.3 billion ($19 billion) Global Infrastructure Investors V fund last week. The fund, which covers private infrastructure and institutional, private wealth capital, is the largest infrastructure vehicle in the firm's history; it represents about £33 billion raised across its latest infrastructure strategies worldwide. The fund will target energy, digital infrastructure and industrial assets across North America and Western Europe, focusing on fiber networks, data centers and the energy transition.

Demand for long-term infrastructure capital continues to climb, even as the pool of investible, scaled opportunities remains constrained. KKR's infrastructure unit has grown from £9.5 billion in assets in 2019 to around £90 billion today, having completed more than 100 infrastructure investments since its founding in 2008.

KKR has pointed to digitalization, electrification, and industrial reshoring as the core themes driving deployment in North America. While in Europe the emphasis is on competitiveness, energy security and economic resilience, echoing Butani's views.

In conclusion, Butani remains optimistic about the outlook for infrastructure as an asset class; it has remained resilient in a higher inflation and interest rate environment, and increasing geopolitical tensions, making an important part of a diversified portfolio.