by EDHEC Infra +BCG

By Frederic Blanc-Brude, Wilhelm Schmundt, Thomas Bumberger, Roman Friedrich, Bernhard Georgii, Abhishek Gupta, Leonard Lum, and Maikel Wilms

In 2022, private investor global assets under management for infrastructure projects will reach a record high of $950 billion. And as the number of infrastructure investors increases, some strategic questions are increasing in importance. How should investors select their exposures to different segments of the infrastructure universe? What risks and returns can they expect and what strategic choices can they make to improve their portfolios? And how will digital infrastructure expansion impact and influence investment choices?

Successfully navigating these questions is critical for any investor hoping to reap consistent and lucrative returns from an infrastructure portfolio. To help in this effort, EDHECinfra and Boston Consulting Group have produced an initial annual report, Infrastructure Strategy 2022, which provides an analysis of the peer group strategies as of 2021 and ranks them based on risk-adjusted returns.

The 2022 rankings include 16 peer groups organised into four categories – Global Peers, Home Peers, Manager Peers, and Asset Owner Peers – which differ widely in investment exposure, risk tolerance, and portfolio focus.

Among the key findings of the report:

  1. In the two Global Peer Group styles, asset managers (a.k.a. General Partners) such as private equity funds, and asset owners (a.k.a. Limited Partners) such as pension funds, endowments, and sovereign funds, a group of 79 asset owners ranked first by gross risk-adjusted returns in 2021, ahead of the group of 280 asset managers.
  2. Oil and gas still pay. Although one-third of the surveyed investors mentioned that they want to decrease their exposure to conventional power generation; after transport, the main beneficiary of the 2021 recovery, especially since wind levels were lower than usual, was gas and conventional power generation. US investors stayed more exposed to these sectors and benefited, while peer groups that have already mostly divested conventional power generation from their portfolios did not.
  3. Looking at the Home Peer Groups, which are defined by the geographic origin of investors, such as North American, EU-based, and Canadian, we see that peer group styles and performance vary considerably by geography of origin. Almost all groups show a strong home bias in their portfolio allocations; European investors invest 80% in Europe, similarly, US and Australian investors have a majority of their assets located in their home regions.
  4. A pivot to the digital frontier. The survey results show that all investors are planning to overinvest into digital infrastructure going forward. While this also entails data centres, towers, satellites and sub-sea connections, the appetite for broadband connectivity remains high. The increasing desire for higher speeds and reliable online access will lead inevitably to a huge expansion of fibre optic installations in new networks in developing nations as well as in existing networks in more developed countries.

The EDHECinfra/BCG Infrastructure Strategy report will be a highlight of the annual international infrastructure investment calendar and will be updated each year to reflect the latest portfolio allocations.

The 2022 research note can be accessed here:

Infrastructure Strategy 2022: A Pivot to the Digital Frontier