TL/DR –
The article discusses the appeal of private infrastructure as an investment in the 2025 economic landscape characterized by high inflation and the impact of rising interest rates. Due to their operational models, private infrastructure investments— which include energy grids, transport networks, and digital infrastructure— can offer inflation protection, stable income, and diversification benefits. These investments are also touted for their resilience as they generally outperform during stagflation, have a low correlation with traditional assets, and are aligned with long-term trends such as energy transition and AI demand for power.
In 2025, high inflation and rising interest rates have rattled the global economy, impacting traditional assets such as equities and fixed income. However, private infrastructure has offered investors a combination of inflation protection, stable income, and diversification benefits.
The Resilience of Private Infrastructure
During periods of stagflation, private infrastructure assets like energy grids, transportation networks, and digital infrastructure have historically outperformed. Toll roads, regulated utilities, and power generation facilities have long-term agreements that account for inflation adjustment, safeguarding cash flows. Recent data from KKR’s 2024 study highlights this, showing a mere 0.58% correlation with global equities. In 2025, the StepStone Private Infrastructure Fund and the iShares Global Infrastructure ETF significantly outperformed the S&P 500.
Diversifying in a Volatile World
Due to its low correlation with traditional assets, private infrastructure is a potent diversifier. These assets provide essential services with consistent demand regardless of economic conditions. Furthermore, the demand for power-driven by the energy transition and AI is amplifying infrastructure’s diversification benefits. For instance, the rise of AI has boosted North American data center capacity demand, creating a positive impact for infrastructure investors.
Generating Income in a High-Cost Environment
In face of rising interest rates, income-focused assets like private infrastructure come to the fore. Many infrastructure assets generate cash flows through regulated rates or long-term service agreements. Policies such as the Inflation Reduction Act (IRA) have unlocked tax credits for clean energy projects, positioning infrastructure as a durable source of income.
Strategic Allocation amid Economic Uncertainties
For investors navigating 2025’s economic uncertainties, private infrastructure offers both protection against inflation and a buffer against market volatility. With low volatility and annualized returns averaging 8.0% since 2023, private infrastructure has outperformed most major asset classes. As central banks pivot toward rate cuts in 2025, infrastructure’s cost of capital is expected to decline, opening new investment opportunities.
Building Resilient Portfolios with Private Infrastructure
Private infrastructure serves as a strategic allocation for hedging inflation, generating stable income, and diversifying portfolios in times of economic turbulence. With an estimated $150 trillion global infrastructure gap by 2040, the sector’s long-term growth potential is promising. The ability to capitalize on these opportunities may offer substantial rewards for investors.
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