Why investors are turning to debt to access infrastructure opportunities

What benefits does infrastructure debt offer LPs?

LPs are turning to debt as a diversifier to their equity exposure to infrastructure. Reasons for this include: no upfront costs, steady cash flow from the beginning, a lower risk level, and access to a larger, diversified market. Infrastructure debt exposes investors to high-quality real assets without the costs associated with due diligence and bidding, which is common in equity investments.

It also provides immediate returns. While equity investments typically follow a J-curve, with returns realized at exit, debt provides steady interest payments and capital repayment. offering more predictable income independent of portfolio exits.

Finally, it offers a range of opportunities. Investors can access a wide set of assets, including core assets like renewable plants, core-plus assets like district heating or fiber optics, and value-added assets like battery storage and EV charging.

What should LPs look for in a manager when investing in infrastructure debt?

LPs should seek managers who combine credit expertise with strong sector knowledge of underlying real assets. Simply, they should be able to do both well: infrastructure and debt. Effective managers structure debt strategically, allocating and transferring risks to align with investor risk tolerance levels. They have a methodical, matrix-like approach to risk, where each risk factor – whether technological, construction, or operational – is evaluated against internal thresholds. Risks outside the acceptable profile are transferred, and retained risks are actively managed. This disciplined allocation and mitigation ensures portfolios are aligned with LP expectations for predictable, risk-adjusted returns.

Equally important is a technical understanding of the underlying regulated assets, as well as of the public sector, regulation, and project implementation. For instance, BRIDGE, our Infrastructure Debt team, comprises engineers, government advisors, and industry specialists. They can assess risks, anticipate challenges, and engage with public-sector stakeholders, operators, consultants, and suppliers.

How can these principles be applied when investing in emerging sectors?

As the energy transition accelerates, LPs are looking to gain early exposure to transformative infrastructure while maintaining portfolio stability. They’ll need to work with managers that can help them strike this important balance in emerging, fast-growing sectors where risks can be higher.

For instance, we were among the first infrastructure debt managers to finance the renewable, digital, EV, biogas, and battery storage sectors since inception in 2014, and we continue to invest in emerging sectors. Our BRIDGE VI fund made its first investment in green hydrogen production earlier this year, after a decade of monitoring the sector. Hydrogen as a strategy can offer significant growth potential and is estimated to generate $2.5tn in annual revenue and create more than 30 million jobs by 2050.¹ But it carries higher technological, operational, and counterparty risks compared with established renewables.

Managers investing in such emerging sectors will need to ensure that investors can access them without undue risk. They’ll need to transfer risks outside acceptable limits to equity holders, structure contracts to preserve the predictability of cash flows, and engage with high-quality counterparties.

_{1 https://www.marketsandmarkets.com/industry-practice/hydrogen/green-hydrogen-opportunities}

About
Jean-Francis Dusch is CEO of Edmond de Rothschild (UK), Edmond de Rothschild’s Global Head of Infrastructure & Structured Finance, and CIO of the firm’s Infrastructure Debt platform (BRIDGE). He is a member of the Investment Committee and sits on the board of the GP.

This article originally appeared in Private Credit Q3 2025: Preqin Quarterly Update.

_{This is a sponsored opinion by Edmond de Rothschild. The views expressed are provided as of November 2025, do not constitute an endorsement, recommendation, or any other advice, and are subject to change. The content does not necessarily reflect the views of BlackRock, Preqin, or any of its affiliates. Edmond de Rothschild is not affiliated with Preqin. Preqin received compensation from Edmond de Rothschild in exchange for publishing this content.}