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In this article
Infrastructure as an alternative asset class encompasses investment in the facilities, services, and installations considered essential to the functioning and economic productivity of a society. The infrastructure market comprises a wide variety of industries and sectors, each categorized as either economic or social infrastructure.
As infrastructure is a relatively new asset class, its definition has evolved over time to include a more diverse range of assets including data centers, motorway service stations, and facilities management companies.
While investors have had buildings, railways, and ports in their portfolios since the early 20th century, an asset class for private infrastructure only fully emerged in the 1990s, following the privatization of state utilities, telecommunication, and transportation companies in the previous decade. This development began in Australia, followed by the UK and Canada, with further expansion occurring across Europe and the US during the 2000's.
Since the Global Financial Crisis (GFC) of 2008, the private infrastructure market has more than tripled in size, with alternatives investors now owning or operating a large proportion of economic infrastructure globally. More than $550bn has been raised by unlisted infrastructure funds over the past ten years – evidence of the sector’s growing importance in institutional investor portfolios. The delivery of strong risk-adjusted returns within this industry, across varying market conditions and regions, has continued to appeal to investors.
The routes to market for investors are discussed in more detail during Lesson 2: Private Capital Fund Structures. Infrastructure investment can be made through unlisted funds, listed funds, or direct investment. Unlisted infrastructure funds tend to have longer life-spans than traditional private equity funds, at up to 15 years with possible extensions.