Weak economy, high inflation, great uncertainty: Kristina Chorna and Michel Caspary analyze how infrastructure investments have performed in such an environment in the past – and how promising these investments remain.

For their study, the two infrastructure experts from HQ Trust determined the annual demand for infrastructure investments in the various sectors and regions. In addition, Kristina Chorna and Michel Caspary calculated the average return of private infrastructure investments compared to a broad equity index such as the MSCI World and the S&P Infrastructure, which contains 75 stocks from the sector – and analyzed the return in different inflation phases.

Commenting on the annual demand for infrastructure investments, Michel Caspary, investment manager, real estate and infrastructure at HQ Trust, said:

  • “Demand for private infrastructure investment remains high: current investment will not meet demand, which is estimated at around USD 3.9 trillion annually through 2040.”
  • “This compares to just USD 178 billion raised by infrastructure funds in 2022. This represents just 4.6% of global demand.”
  • “The greatest demand is currently in Asia, but annual demand in the infrastructure markets of Europe and North America is also still well above what is being collected by funds. Among sectors, demand is highest in transportation and energy, followed by telecom and water.”
  • “Economic downturns or crises do not change the high demand. Since infrastructure provides essential services, usage generally declines only slightly.”

On returns, Kristina Chorna, head of infrastructure at HQ Trust, said:

  • “Comparison with other investments shows that private infrastructure assets offer attractive and stable returns, even in an inflationary environment.”
  • “Infrastructure’s resilience has been most evident in the past during weaker capital markets. The sector did particularly well during periods of low GDP growth and high inflation.”
  • “Rising inflation-related costs and interest rates can usually be passed on to customers through contractual agreements, regulation or pricing power.”
  • “Across all sectors, more than 2/3 of companies are able to do this.”
  • “HQ Trust’s current focus is on investment strategies with a return mix of ongoing revenue secured through long-term contracts and value enhancement measures that come from operational improvements such as revenue growth, cost reduction or buy-and-build strategies.”