Looking to the past, the present, and the future of infrastructure following a tenacious year.
January 16, 2025 (Preqin News) – A prolonged slowdown in infrastructure fundraising has led fund managers to draw on their reserves of dry powder. As a result, dry powder as a proportion of AUM has declined from 34.8% at the end of 2020 to 23.9% in 2024, despite a subdued deal market.
Although dry powder stock across all infrastructure strategies dropped to $333.9bn at the end of 2024, it was still 3.6 times the amount of capital calls over the 12 months to Q3 2024 ($92.9bn), the latest date for which capital call data is available, according to Preqin 2025 Global Report: Infrastructure.
Depleted capital reserves for infrastructure
Infrastructure AUM and dry powder as a proportion of AUM, 2014 – March 2024
Source: Preqin Pro. Data as of January 2025
A total of $94.8bn was raised across 94 infrastructure funds in 2024, almost exactly the same amount as the $94.7bn in 120 funds in 2023, though the total will likely rise further as more data is collected, according to the latest data on Preqin Pro. However, both years were the least capital raised in any year since 2015 and just over half the record $172.8bn in 2022.
Infrastructure deal numbers have broadly declined since 2017 when they peaked at 3,477 deals totaling $419.2bn. The number of transactions has more than halved since, with Preqin recording 1,951 transactions with an aggregate value of $311.2bn in 2024.
However, deals in renewable energy remained resilient, accounting for 46.9% (916) of deal volume, slightly down from a three-year average of 49.3%. Whether this appetite for renewables over conventional energy sources will continue in a Trump presidency will play a huge role in determining the near-term future of infrastructure investment.
Preqin News spoke with infrastructure managers to gather their thoughts, opinions, and predictions for fundraising, deals, and performance in 2025.
Fundraising
Fundraising for infrastructure assets has picked up considerably during 2024, and we expect this upward trend to continue in 2025. Infrastructure remains a highly attractive asset class that provides stability and resilience to investors while offering a 200–400 basis point premium over corporate bonds on the back of strong illiquidity and complexity premia. On the equity side, the repricing of assets has created a favorable environment for funds with dry powder' ready to deploy.
Patrick Liedtke, Chief Client Officer, Chief Economist, Infranity
We’re coming out of a period where it’s not been easy on the fundraising side, or the investment side. There has been a bit of repricing, inflation is coming down, and interest rates are coming down. Everyone is quite cautious, but it is opening up. Some of the conversations we started a long time ago are now getting real and meaningful. Whether they’ll have happy endings remains to be seen.
Kasper Hansen, Managing Partner, CEO, AIP Management
During 2022–2023, the priority among CIOs was the denominator effect and portfolio rebalancing. As interest rates have leveled off and begun to come down, focus has shifted back to the liquidity premium. CIOs are asking whether the superior returns for alternatives justify the illiquidity. Our latest fund targets 12–15% net returns – which we think is an attractive liquidity premium – but investors still want to know how they can exit.
Frederick Carter, Investment Director, Augusta Investment Management
The demand for capital in infrastructure debt, particularly within the energy and power sectors, is expanding at an unprecedented rate. For the hundreds of billions or potentially trillions of investment that will be needed annually to meet power demand globally, infrastructure debt is going to be a critical source of capital.
Don Dimitrievich, Senior Managing Director, Portfolio Manager for Energy Infrastructure Credit, Nuveen
Dimitrievich’s comments appeared in the Preqin 2025 Global Report: Infrastructure. Read the full article here.
Deals
Demand in the energy transition space is almost limitless. Of course, there are ups and downs in the short term, but over the long term, I don’t think anyone is questioning the need for more clean energy. But you need to be able to deploy large sums of capital cost-effectively into projects that are getting larger and increasingly complex.
Kasper Hansen, AIP Management
There is increasing pragmatism in pursuing net zero. That means cranking up government incentives where the markets are falling a little short, such as the solar rollout, and cutting back ambitions that are too far out of the money, such as some of the hydrogen megaprojects. A lot of capital has been chasing the US Inflation Reduction Act incentives. If Trump winds those back, capital will return to Europe and APAC.
Ivor Frischknecht, Managing Partner, CIO Asia Pacific, Sosteneo Infrastructure Partners
All the major tech companies are investing in generative AI, which will require a significant amount of incremental power. It’s now widely recognized that power supply is the bottleneck for the build-out of large-scale data centers. The one cautionary point I would also make is that we’re seeing potentially hundreds of billions of expected investment in AI. If it turns out that the anticipated efficiency gains from AI don’t fully materialize, we’re going to find ourselves with significant excess data center and power capacity.
Don Dimitrievich, Nuveen
We don’t invest in wind farms or solar parks, we invest in electricity, which is a much more liquid asset class. As well as infrastructure fund managers, our secondary market includes anyone who buys large volumes of electricity – utilities, energy traders, or even large corporates. Our buyer universe is broader than that of a bricks-and-mortar asset owner, which seems to resonate with CIOs. I expect the focus on liquidity and redemptions to continue as a theme in 2025.
Frederick Carter, Augusta Investment Management
It’s no secret that infrastructure secondaries investments have been surging. This is a function of the continued growth in infrastructure AUM, the natural maturation of the infrastructure asset class, as well as the increasing appetite for LPs to access liquidity given exit constraints across private markets in recent years.
James O’Leary, Partner, Head of Infrastructure and Real Assets, StepStone Group
O’Leary’s comments appeared in the Preqin 2025 Global Report: Infrastructure. Read the full article here.
Infrastructure secondaries are definitely experiencing growth. We’ve seen the deal flow expand in terms of variety and the number of participants interested in selling, both from LPs and GPs interested in continuation vehicles. There’s been a lot more momentum this past year and we’re seeing a healthy growth of 15–20% in AUM in infrastructure secondaries.
Wandy Hoh, Head of Infrastructure Secondaries, Macquarie
Performance
Despite infrastructure’s still slow fundraising and deals environment, performance remains resilient. The Preqin index shows that performance has consistently been positive, rising in all but one quarter since 2009. However, infrastructure’s success in recent years has been hampered by high interest rates more recently, raising concerns over performance sustainability.
Alex Murray, Head of Real Assets, Research Insights, Preqin
We’ve seen private equity managers and platforms moving into the space, but we’re still very focused on what I would call essential infrastructure, the traditional assets and projects. That’s a reflection of our heritage, our strategy and approach, and the fact that we don't like too much risk. We’re here to deliver very long-term, stable returns to the investors. And that’s the beauty of what I call essential infrastructure.
Kasper Hansen, AIP Management
To meet the needs of rapidly transforming societies, viable infrastructure projects must be productive and impactful at the same time, and investors increasingly understand this. Our investments are tested for many risk factors, ranging from idiosyncratic risks to the macroeconomic environment or climate impact. We look for sustainability, strong resilience, and attractive risk-adjusted returns.
Patrick Liedtke, Infranity
As renewable energy technologies have matured, investor focus has shifted from managing technical risks to managing price risks. Fund managers know that the value of their renewable portfolios lies in power purchase agreements, hedges, and their ability to manage price risk – including the risk of price volatility. The step we have taken is to remove technical risks entirely, leaving them in the hands of the owner who has managed the asset for decades. Our investments are really a partnership with the owners of renewable plants: they produce the electricity, we maximize the returns from the electricity.
Frederick Carter, Augusta Investment Management
The return set from secondaries is consistent with what infrastructure should deliver. The difference is the shorter duration, mitigating the j-curve, access to near-term distributions, and achieving diversification in several ways, including managers, vintages, sectors, and geography. Depending on the needs of your portfolio, infrastructure secondaries could be a great addition to help balance with characteristics that you might not be able to achieve with just simply primaries.
Wandy Hoh, Macquarie
An infrastructure secondary fund will often be far more diversified than a primary one, typically containing over 10 times more underlying assets, and a broader selection of managers, sectors, and vintage years. This significant diversification lowers the risk profile of such investments. Secondaries funds also typically deploy capital faster as they acquire fully or significantly built portfolios that are already well along on their value creation paths. This necessarily implies a lower duration and faster return of capital.
Marc Meier, Managing Director, Partners Group
With the increase in base rates over the last two years, you’re able to generate all-in returns from infrastructure debt that are equivalent to where infrastructure equity returns have historically been. On top of that, by accessing the market opportunity as a credit investor, you are better protected than equity providers, while benefiting from very appealing risk-adjusted returns. When structured properly, these transactions can offer significant structural and covenant protection.
Don Dimitrievich, Nuveen
The opinions and facts included within the above do not constitute investment advice. Professional advice should be sought before making any investment or other decisions. Preqin providing the information in this content accepts no liability for any decisions taken in relation to the above.