Investing in private infrastructure has historically been the domain of institutional investors and pension funds – until recently. The appeal is clear. From airports and utilities to modern data centres, these assets provide essential services that are governed by long-term contracts or regulation. The result: stable, inflation-protected cash flows, and portfolio diversification that few asset classes can match.

Barriers to access for this asset class are now decreasing thanks to new investment fund structures, including open-ended vehicles such as mutual funds with lower minimum investments.

“What has changed isn’t the investment thesis, but access. Retail investors are being invited in,” says Darrin Pickett,
portfolio manager, Global Infrastructure Investments at RBC Global Asset Management.

As investors rethink diversification in portfolios tailored for today’s markets, he says infrastructure – with its low correlation to stocks and bonds – has emerged as a compelling alternative.

“A convergence of structural forces is turning infrastructure into one of the defining investment opportunities of the decade,” Mr. Pickett says. “Behind the surge in interest lies a powerful set of long-term drivers, sometimes described as
the four D’s: digitalization, deglobalization, decarbonization and demographics.”

For example, the push toward net-zero emissions is fuelling massive investment in grid modernization, energy storage
and renewable power generation. At the same time, the digital economy demands an ever-expanding backbone of fibre-optic networks and mobile towers.

Meanwhile, geopolitical tensions and supply chain disruptions are increasing, prompting many countries to invest more in domestic infrastructure, from energy systems to manufacturing capacity. Population growth, particularly in urban centres, also continues to strain existing infrastructure, calling for expansion and renewal of water systems, transit and other critical systems.

A recent PwC report states that annual global infrastructure spending is forecast to rise to US$6.9-trillion in 2050 from US$4.4-trillion in 2024, driving a cumulative investment of US$151.1-trillion, translating into a deep and growing pipeline of opportunities.

Governments alone cannot fund the entire increase in infrastructure spending, so private capital will play an increasingly important role going forward.

Infrastructure’s central role in both economic competitiveness and national security is creating longterm, policy-backed investment opportunities. To Mr. Pickett, the areas of digital infrastructure, energy transition and regulated utilities (especially those investing in grid expansion) offer some of the best opportunities in today’s market. Geographically, he says, North America, Europe and Australia remain the most attractive regions due to transparent regulatory frameworks.

To harness those opportunities, the RBC Global Infrastructure Fund focuses on contracted or regulated infrastructure in Organisation for Economic Co-operation and Development (OECD) markets. It targets the lower end of the risk spectrum and includes companies that span toll roads, airports, ports, communication towers, fibre to the home, smart metres, water desalination, renewable power and regulated utilities.

Mr. Pickett says RBC GAM maintains a unique approach to sourcing and executing investment transactions. In its
partnership-based and open-architecture model, the fund co-invests alongside leading institutional investors, pension
funds and sector specialists.

“This structure expands access to a global deal pipeline, enabling selectivity across geographies and sectors, and ensuring that the most capable partners are matched to each opportunity,” Mr. Pickett says.

Despite the growing popularity of infrastructure investing, many retail investors still have misconceptions about the asset class. Some see it just as roads and bridges, or mistake it for a strategy with low returns. Some also view it as a short-term investment opportunity, which can be traded tactically like an ETF. However, its strength lies in its riskadjusted returns, combining income, inflation protection and downside resilience over the long term in a way that few asset classes can match.

Infrastructure investing isn’t without risk, however. Regulatory changes, political pressures and financing costs can all affect returns. These are capital-intensive, longduration assets, and performance is measured over years, not quarters.

Still, for many retail investors the question is no longer whether infrastructure belongs in a portfolio, but how much.
Institutional allocations may provide a useful benchmark, typically in the range of 10 per cent or more. For individuals,
Mr. Pickett says a 5 to 15 per cent allocation is often a reasonable starting point, depending on risk tolerance and investment horizon.

The key is to treat infrastructure as a complement to equities and fixed income, one that can enhance diversification while
providing a steady stream of income. “Infrastructure investing rewards patient investors. It’s best viewed as a strategic allocation, not a tactical trade,” Mr. Pickett says.

Advertorial content by RBC Global Asset Management