The global economy’s new regime of higher interest rates, sticky inflation, and slower growth is a market environment that has historically favored infrastructure investing.

Meanwhile, secular trends—including digitalization of the world’s economies, a need to improving aging infrastructure, higher power demand from AI and other needs, and deglobalization—are accelerating infrastructure spending. An estimated $94 trillion of infrastructure investment is needed by 2040.

This powerful combination of today’s economic regime and the world’s growing infrastructure investment needs is one that we believe will drive strong relative and absolute performance for listed infrastructure companies.

These factors are also driving continued increased allocations by investors across both listed and private infrastructure. In fact, more institutional investors intend to increase their allocations to infrastructure than any other asset class, according to Mercer_⁽¹⁾.

As investors increase their allocations to infrastructure, we believe listed infrastructure earns a growing portion of that allocation. Even if private infrastructure is already a part of a broad asset allocation, we believe listed assets should complement private holdings. Listed markets can also help managers deploy dry powder, completing their target allocations.

Driving this recommendation:

• Listed infrastructure has the potential to offer the strong returns and diversification that investors seek without the downsides of illiquidity and higher fees of many private investments.
• Data show listed and private infrastructure investments offer similar returns and volatility long-term.
• Allocations to both can provide increased diversification and access to complementary investing universes.
• Blending private and listed assets allows investors to tailor preferences around risk, return, fees, liquidity, investment horizon, and asset exposure.

(1) Mercer Investments’ Large Asset Owner Barometer

What’s more, recent underperformance by listed infrastructure is explainable, unlikely to persist and creates a favorable entry point for listed infrastructure. In effect, we believe that listed infrastructure is attractively valued relative to private and already reflects the market’s higher cost of capital, which are lagged in private.

The long-term case for adding infrastructure to an equity or stock/bond portfolio is compelling, based on the asset class’s return, volatility and correlation attributes (Exhibit 1).

Both listed and private infrastructure have a history of equity-like returns with downside protection, largely due to relatively low cash flow volatility (which stems from infrastructure companies’ long-term contracts and provision of essential services). These assets have long appealed to investors seeking diversification and stable income.

Contrary to the misconception that private consistently outperforms listed, their historical returns are nearly identical.

At March 31, 2025. Source: Cohen & Steers.
The information presented above does not reflect the performance of any fund or other account managed or serviced by Cohen & Steers, and there is no guarantee investors will experience the type of performance reflected above. There is no guarantee that any historical trend illustrated above will be repeated in the future, and there is no way to predict precisely when such a trend might begin. Listed infrastructure represented by the FTSE Global Core Infrastructure 50/50 Net Tax Index. Global equities represented by the MSCI World Net Index.

The asset class is particularly appealing today given heightened market volatility, stickier inflation and slowing growth. Indeed, the top three risks Mercer identified in its asset owner barometer are stagflation (38%), geopolitics (33%) and volatility (28%).

Contrary to the misconception that private consistently outperforms listed, their historical returns are nearly identical. That performance has diverged in recent years, but we believe this is a short-term and easily explained phenomenon that actually creates a favorable entry point for listed infrastructure relative to private, which we believe is overpriced given it does not reflect the higher cost of debt and equity today.

From 2004 to 2021, listed infrastructure had annualized returns of 9.3%, while private infrastructure returned 9.4% (Exhibit 2). This is consistent with the fact that both have similar return profiles over the long term.

The recent divergence began in 2022 when the Federal Reserve raised rates aggressively to combat inflation. Higher interest rates increase the cost of borrowing, which can affect pricing for infrastructure assets and businesses that rely heavily on debt financing.

Rising interest rates drive higher discount rates for future cash flows, resulting in lower valuations for infrastructure assets and impacting their returns. Listed infrastructure, due to its liquidity and price transparency, repriced to reflect higher equity and debt costs in current valuations.

By contrast, private infrastructure valuations have not adjusted for a new cost of capital, evidenced by their steady positive returns. From 2022 through 2024, private infrastructure cumulatively returned 30.3% while listed returned 9.2%.

Given the similarity of returns over the preceding 15 years, we do not believe compositional differences between listed and private markets fully explain the variance. We believe it’s a function of how the asset classes are valued.

While long-term performance of listed and private infrastructure is nearly equivalent, the recent performance gap is not unprecedented; significant multi-year gaps have occurred in the past. The starkest example was during the global financial crisis (GFC) when listed markets quickly moved lower first and private returns repriced after. The magnitude of the performance gap then between listed and private was similar to what we are seeing today, and we would expect private returns to similarly lag as they did post-GFC.

At December 31, 2024. Source: Burgiss, Cohen & Steers.
The information presented above does not reflect the performance of any fund or other account managed or serviced by Cohen & Steers, and there is no guarantee investors will experience the type of performance reflected above. There is no guarantee that any historical trend illustrated above will be repeated in the future, and there is no way to predict precisely when such a trend might begin.
Listed Infrastructure represented by UBS Global 50/50 Infrastructure & Utilities Index GR through 2015; FTSE Global Core Infrastructure 50/50 Index GR thereafter. (b) Private Infrastructure represented by Burgiss Global Private Closed- Ended Infrastructure Index.

Today’s divergence is due to endpoint sensitivity, not a persistent trend. The fundamentals supporting infrastructure investments are intact for both listed and private markets. We believe listed markets will catch up to cumulative private infrastructure returns as they have in the past.

Infrastructure’s low relative volatility and equity beta attract investors to the asset class. Listed infrastructure exhibits lower volatility than equities and a low beta of around 0.7. However, comparisons between the volatility of private and listed infrastructure warrant a deeper look.

At first glance, listed returns exhibit more volatility than private, but it’s common for listed markets to exhibit elevated day-to-day volatility. Private infrastructure quarterly returns are driven by appraisals and non-transactional valuation techniques that smooth returns and dampen volatility. While some investors view “statement smoothing” as a feature, it does not accurately reflect true underlying economic volatility.

Private investments use various valuation approaches, including discounted cash flow modeling, multiple analysis and comparable transactions. These methods have merits but also challenges, such as subjectivity in adjustments to cash flow or discount rate projections and limited comparable transactions in some industries or countries. The result is that private infrastructure can have a steady return stream that appears to be managed.

Over time, returns should align, but quarterly and multi-year gaps can be expected. Statistical analysis is used to “unsmooth” returns of private infrastructure, suggesting comparable levels of underlying asset volatility in listed and private markets. Despite differences between mark-to-market and smoothed valuations, we see a high correlation of returns over longer periods (Exhibit 3). This consistency with historical patterns suggests that investors in listed and private infrastructure ultimately benefit from similar fundamentals. These dynamics are consistent with what we have observed over the long term in real estate.

Correlation of listed^(a) vs private^(b) infrastructure

At March 31, 2025. Source: Burgiss, Cohen & Steers
The information presented above does not reflect the performance of any fund or other account managed or serviced by Cohen & Steers, and there is no guarantee investors will experience the type of performance reflected above. There is no guarantee that any historical trend illustrated above will be repeated in the future, and there is no way to predict precisely when such a trend might begin.
(a) Listed Infrastructure represented by UBS Global 50/50 Infrastructure & Utilities Index GR through 2015; FTSE Global Core Infrastructure 50/50 Index GR thereafter. (b) Private Infrastructure represented by Burgiss Global Private Closed- Ended Infrastructure Index.

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Both listed and private infrastructure are diverse by geography and sector, but their concentrations differ, making them good complements. According to Preqin, portfolio diversification is the top reason institutional investors allocate to infrastructure.

EDHEC, the international business school that produces extensive research on infrastructure and private assets, calculated that 57% of private infrastructure assets are in Europe and 30% in the Americas. Listed indexes typically have 60% in North America and 20% in Asia.

There are several reasons for the geographic differences, but key factors include the large market capitalization of regulated, publicly listed utilities in the US and the greater opportunity for private ownership of infrastructure internationally compared to the US where infrastructure is more likely to be government owned and operated. Balanced listed and private allocations can increase geographic diversification.

By sector, listed infrastructure offers allocations to a more diversified basket of companies, providing differentiated portfolio construction. Private infrastructure is more heavily allocated to energy, while listed has greater exposure to utilities (Exhibit 4).

Notably, however, private infrastructure investment is dependent on deal flow, which ebbs and flows by market demand and cycle stage. In the last five years, for instance, 89% of private transactions occurred in just energy, telecommunications and transportation. Listed, by definition, allows investors to continually allocate more nimbly across a wide range of sectors.

Listed managers can also create more diversified portfolios, while private managers have more concentration risk due to required asset sizes. This results in more concentration in private portfolios than investors realize.

*Other includes: Social, Waste management.

At December 31, 2024. Source: GLIO, Preqin, Burgiss.
FT Wilshire GLIO Global Listed Infrastructure Index is used to provide relevant sector comparisons to private infrastructures in Burgiss database.

Institutions are not deploying private capital quickly enough to meet infrastructure allocation targets. Research from Preqin estimates that sovereign wealth funds, endowments, public pensions and other institutional investors have only funded 78% of their targets.

This has led to a significant buildup of dry powder—capital committed but not yet deployed—within private infrastructure funds (Exhibit 5). We believe listed infrastructure can help close that allocation gap given the complementary nature of private and listed investments over the long term and the current relatively attractive valuations of listed.

This increase in dry powder reflects not only private infrastructure GPs’ success in raising capital, but also the difficulty those GPs are having sourcing and executing on typically complex transactions in an increasingly competitive environment. As more funds are committed to the space, there are significant implications for both private and listed investors.

Private infrastructure dry powder, $ billions

At December 31, 2024. Source: Preqin, Goldman Sachs, Cohen & Steers.
Past performance, which is no guarantee of future results. There is no guarantee that any historical trend illustrated above will be repeated in the future, and there is no way to predict precisely when such a trend will begin. As defined by Preqin, “dry powder” is the amount of capital that has been committed to a private equity fund minus the amount that has been called by the general partner for investment. Preqin dry powder figures represent all private funds reporting data at 12/31/24.

First, recent transactions suggest that the definition of “core” infrastructure in private funds is being expanded, allowing managers to cast a wider net. This means that investors may be exposed to assets lacking traditional attributes of infrastructure investments, such as inflation mitigation or resilient revenue models.

Second, listed companies are increasingly turning to “asset recycling” to fund growth initiatives, leading to a trend of selling assets, stakes, or entire businesses to private infrastructure investors—often at significant premiums. Over the last five years, there have been more than 100 such transactions, with an average premium of 31%. We believe the demand from private infrastructure investors creates a floor under the expected valuations for listed infrastructure companies.

Listed infrastructure is currently trading at a 10% discount to global equities, compared with a historical average premium of 9%.

In addition, listed infrastructure valuations are unusually attractive. Listed infrastructure is currently trading at a 10% discount to global equities, compared with a historical average premium of 9%.(1) We expect that discount to narrow, given the new macro environment and tailwinds benefiting infrastructure businesses.

The bottom line: Most institutional investors remain under-allocated to infrastructure (Exhibit 6). We believe investors should turn to listed infrastructure to close that gap considering the combination of the currently attractive valuations for listed infrastructure and the long-term attributes that make listed complementary to private.

At May 1, 2024. Source: “2024 Institutional Infrastructure Allocations Monitor,” published by Cornell University and Hodes Weills.