Infrastructure investors are becoming much more selective about how and where they put their money, citing geopolitical uncertainty, fears of an AI bubble and regulation, a new survey of global asset owners suggests. 

Based on a survey of more than 40 investors handling about $2.3tn (£1.7tn), consultancy bfinance says infrastructure markets are entering a more mature phase. 

Investors still value infrastructure for its ability to provide stable income, diversification and resilience, but risk and valuations are now in focus, the consultancy found. 

“The sentiment that emerges from this study is clear. Investors are confident in the long-term role of the infrastructure asset class, but they are more selective about how and where they take risk, more attuned to macro forces, and more cautious in how they structure portfolios and relationships,” said head of infrastructure, Anish Butani. 

“This is not a retreat from infrastructure – it is a refinement. Disciplined conviction and alignment of interest must replace blanket optimism and bullish messaging. A market once defined by enthusiasm must now be defined by experience,” he added. 

The report notes that “fingers have been burned” as “many investors reported hard lessons from recent projects”. 

Global asset owners still own core infrastructure but are moving towards core-plus and value-add strategies, described by bfinance as “the workhorses of asset owners’ infrastructure portfolios, offering what many describe as the best ‘risk-reward’ efficiency – especially in sectors like energy transition, power, digital connectivity and transport”.  

However, some want to avoid taking private equity-style risk in their portfolios, the firm added, finding a decline in tolerance for greenfield exposure.  

One global allocator said: “When there was a bigger focus on ESG (2020), a lot of capital was going into greenfield and building renewables; investors valued its additionality. Today, [we] prefer exposure to assets with an operating base that have some capex.” 

Issues like permit-gathering timelines, supply chain volatility, inflation-driven cost uncertainty were listed, and investors provided anecdotal experiences of projects that ran over budget or schedule. 

The survey was conducted before the start of the US-Iran conflict, but even then, growing geopolitical and economic uncertainty was top of mind for investors, with 27% naming geopolitics as their number one concern for infrastructure, at the time citing tariffs, immigration, energy security and US-China decoupling. 

Fears of an AI bubble also featured highly with 18%. Several noted they felt uneasy about data centre valuations. One unnamed Nordic pension fund representative said: “The data centre multiples that we're seeing are difficult for me to wrap my head around. But if you don't invest directly in data centres, there’s opportunities in data centre-adjacent technology such as behind-the-meter renewables.” 

Tied with AI bubble fears were concerns over inflation and interest rates (18%) and about regulation (18%). Perhaps surprisingly, just 9% chose climate risk as a key concern. bfinance argued this suggests a “shift in sentiment since the late-2010s due to the immediacy of current issues facing even long-term investors”. 

ESG implementation is also “becoming more pragmatic and operational”, the consultancy argued, as rather than pursuing labels or certification, investors emphasise the management of climate risk, biodiversity exposure, governance quality and reputational considerations.  

In geographical terms, investors see Europe as steadier in both a regulatory and political sense compared with US exposure, which brings more board‑level scrutiny, despite some believing there are opportunities for better valuation resets. 

Investors are also sometimes changing the vehicles they use, the survey found, as they show less appetite for long-duration fund structures, wanting capital returned within 10-15 years. Open-ended vehicles are often favoured for core, income-oriented exposures, while close-ended funds remain the default for value add, transition and operational improvement strategies, according to bfinance. 

The survey suggests investors now seek fewer but deeper manager relationships because of cost, internal resource constraints and a greater focus on alignment.

In the UK too, pension funds are looking to real assets. At the Pensions UK Investment Conference earlier this month, chief investment officer of the People’s Pension, Dan Mikulskis, and CIO of the Border to Coast asset pool Joe McDonnell both cited property and infrastructure as areas of interest, particularly domestic exposures, with McDonnell singling out family housing and energy infrastructure.

The government is keen to see more pension fund investment in UK projects. Speaking at the same event, pensions minister Torsten Bell ‘pitched’ numerous projects to the assembled investment decision makers, such as the Lower Thames Crossing, Heathrow airport expansion, water reservoirs and even small modular nuclear reactors, highlighting that the government has published an updated pipeline. 

However, some UK pension funds have had negative experiences with infrastructure, particularly in the water sector, with the Universities Superannuation Scheme writing down its holding in Thames Water and the NatWest Group Pension Fund being named as one of the owners of South East Water, which was responsible for leaving thousands of households without water for days in December and January, in the latest of multiple supply failures.
   
USS blamed inconsistent regulation, and warned in 2024 that the experience would guide its future approach to regulated assets and more broadly.