Infrastructure Quarterly: Q1 2026

Private infrastructure exhibits remarkable consistency

The asset class continues to deliver steady performance in the 10%–13% range, gross of fees (Figure 1). This underscores its ability to weather market cycle swings and, importantly, provide inflation-linked, recurring returns. The U.S. is leading the AI-driven digital transformation that has propelled a power supercycle and outperforms the global private infrastructure index.

Listed infrastructure staged a notable rebound in 2025, achieving a 15% annualized return. The sharp rally in public equities over the past year was supported by the surge in AI-related investment and easing policy interest rates. Given that private infrastructure performance is reported with a lag, the strength in listed infrastructure may signal an upward trajectory for its private counterpart.

Figure 1: Infrastructure, bonds and equities annualized total returns

Digital infrastructure achieved the strongest overall performance among sectors over the past five years; its superior returns are fuelled by capital appreciation linked to AI- and cloud-enabled demand. Transport and power have emerged as the clear leaders in income generation (Figure 2). Power utilities often benefit from regulated revenue frameworks and predictable cash flows. Transport experienced a greater variability in dividends due to the pandemic hit on traffic but has since fully recovered.

Figure 2: MSCI Private Infrastructure Index, rolling annual income return

Following a sharp surge during the fourth quarter, infrastructure funds raised close to $300 billion in 2025, a new peak for the asset class (Figure 3). Capital inflows remain heavily concentrated, with the top 10 managers accounting for 44% of total commitments. This creates a pronounced crowding effect at the large end of the market. Assets under management (AUM) in private infrastructure increased threefold over the past decade. However, dry powder has gradually declined to 23% of AUM, signaling healthy deployment.

Figure 3: Infrastructure fundraising

In an environment characterized by soft M&A deal count and extended exit timelines, investors are increasingly focused on liquidity considerations. A growing number of investors express interest in open-end vehicles, which offer more flexible liquidity management than closed-end funds and steady exposure to the asset class. In addition, according to a Preqin survey, 21% of investors are considering allocating to secondaries, up from 9% in the previous year.

Investors are also turning to mid-market infrastructure due to its broader range of exit options and more flexible, scalable strategies. The mid-market deal flow was more regular than the mega assets, despite market dislocations. Heightened macro uncertainty triggered a steep decline in mega deal activity from 2022 to 2024, while mid-market transactions rose by 8%, suggesting more manageable exits (Figure 4).

Figure 4: Private infrastructure deals, mid-market and mega

Call to arms for private capital

Private infrastructure investment continues to increase, supported by both policy priorities and structural trends. As cloud computing and AI accelerate the build-out of data centers, digital infrastructure remains the crown jewel within private infrastructure. North America has been the primary beneficiary of this tailwind, recording a 50% year-over-year (Y-o-Y) increase in investments in 2025, with digital infrastructure accounting for 26% of the total deal flow (Figure 5).

The U.K. also saw a notable pickup in activity, with investments more than doubling in 2025. This upward trend is supported by the government’s commitment to advancing infrastructure as a key driver of economic growth under its 10-year infrastructure strategy. In addition to a strong pipeline of projects in the U.K., Infralogic lists 190 infrastructure assets that are due for exit from closed-end funds in the next four years. In addition to a strong pipeline of projects, Infralogic lists 190 infrastructure assets located in the U.K. that are due for exit from closed-end funds in the next four years.

Figure 5: Private infrastructure investments by region

Debt-to-GDP ratios surged across major economies following the pandemic, as governments provided fiscal support to stabilize economic activity (Figure 6). With sovereign balance sheets stretched, governments increasingly rely on private capital to achieve their geopolitical aims: technological leadership, energy and economic security. In the U.S., the Stargate project aims to invest $500 billion of federal funding into hyperscale data center development. In Europe, the REPowerEU plan reduces the reliance on fossil fuels by directing €300 billion in funding to European Union (EU) member states.

Figure 6: Government balance sheets vs. private infrastructure investment

Power and utilities

The U.S. power market is entering a power supercycle, fuelled largely by rapidly rising electricity demand from expanding data center development. Market fundamentals remain robust and demand from data centers alone is expected to more than double from current levels by 2030. Utility companies are preparing to add substantial new generation capacity to meet these rising load forecasts, supporting broader economic expansion. Capital expenditure is also set to increase meaningfully, with a projected 13% rise through 2027 to build generation and grid assets (Figure 7).

As this surge in demand accelerates, data center developers are locking in as much power as possible to avoid future growth constraints, highlighting both the pace and urgency of scaling power supply. However, the ultimate magnitude of infrastructure required for AI remains uncertain, and government subsidies that attract large-scale new build generation could introduce the risk of significant overbuild.

Figure 7: U.S. Utility capex expenditure

These build-out pressures unfold at a time of heightened geopolitical pressure on energy costs. The strikes on Iran and the ensuing conflict in the Middle East are leading to soaring gas prices and escalating fears of energy price shocks. Asian countries are heavily reliant on liquefied natural gas (LNG) produced in the region and the LNG spot prices influence the costs for Europe to refill its gas storage over the summer. At the onset of the Russia-Ukraine war, EU governments sought to limit the energy price hikes with price caps and windfall taxes on power generators. Similarly, EU policymakers may now accelerate power market reforms to delink (and consequently lower) wholesale power prices from commodities and carbon.

Renewables

Global investment in energy transition reached $2.3 trillion in 2025, an 8% increase from the previous year. Renewable energy achieved $690 billion in investment, with solar dominating the category (BNEF Energy Transition Trends 2026). The continued momentum in renewable investment expands the pipeline of investment opportunities for infrastructure investors, notably in markets with double-digit clean energy growth such as the EU and the U.K. Declining input costs due to overcapacity in battery manufacturing globally, for example, also benefit the returns of renewable developers.

In the U.S., 2025 was marked by policy disruptions that slowed progress on several energy transition initiatives. Federal agencies cancelled permits for offshore wind projects already under construction and withheld funding for clean energy programs. Total U.S. energy transition investment still grew 3.5%, supported by resilience in electrified transport and grid investment, which helped offset a slight decline in renewable energy spending.

Market dynamics are becoming more challenging for renewable energy assets exposed to merchant power prices in markets with strong renewables penetration. Figure 8 shows a sharp increase in hours with low wholesale market prices in Iberia, especially during the spring months when hydro inflows coincide with strong wind and improving solar output. Solar photovoltaic (PV) and onshore wind projects that sell power at market rates face more frequent low prices and curtailment—a market effect that arises when total supply exceeds demand, leading system operators to reduce renewables output to maintain grid stability.

Figure 8: Number of hours at low prices (less than €5/MWh) and proportion of monthly hours

Digital infrastructure

The digital infrastructure sector continues to experience extraordinary expansion, with data center demand persistently outpacing available supply (Figure 9). While the current demand for data center capacity is primarily driven by the compute and power-intensive requirements of AI training, subsequent phases will involve AI inference. In preparation, the major hyperscalers such as Amazon, Microsoft, Google and Meta are expected to deploy more than $600 billion in capital expenditure in 2026, an additional $230 billion more than what was earmarked for 2025.

Figure 9: Global data center supply vs. demand, gigawatts (GW)

Development pipelines have expanded meaningfully, though capital market dynamics reveal a growing risk for mega data center platforms as exit pathways remain unclear. Capital deployment in the sector has risen sharply since 2020, led by greenfield development and additional equity and financing rounds (Figure 10). However, this increase has not been recently matched in M&A or public market exit opportunities.

In 2025, the transaction market was overshadowed by one record-setting data center M&A deal, the $40 billion acquisition of Aligned Data Centers. Initial public offerings (IPOs) for data centers could begin in 2026 but for now, the companies going public have been tangential to the data center industry, such as neocloud providers (renting high-performance chips) and AI energy developers.

Figure 10: Global data center deals by type

Transport

Market conditions across most global transport markets remain supportive and continue to normalize following last year’s trade and policy disruptions. However, recent events are introducing pockets of short-term volatility, notably in select U.S. ports and global airports. Steady GDP growth continues to underpin sector fundamentals and partially offsets softer travel demand. Overall, the sector begins 2026 on a firmer footing with improved visibility on growth prospects.

U.S. port traffic was broadly stable through most of 2025, though regional divergences have sharpened in recent months. Most major gateways held port volumes in line with prior trends, with Houston continuing to outperform on a trailing 12-month basis and the reopening of Baltimore supporting a rebound. In contrast, New Jersey/New York experienced a pronounced decline as cargo flows adjusted following Baltimore’s return to operation. Privately supplied shipping points to a mild moderation across both West Coast and East Coast ports, with several gateways registering late-year declines (RSM The Real Economy). Imports from Asia, after surging in 2024 and early 2025, have eased considerably, and export activity has softened amid shifting U.S. trade policy and cooling global demand.

Against this backdrop of softening trade flows, the ongoing conflict in the Middle East introduces near-term uncertainty for the global transport sector. The Strait of Hormuz, which facilitates approximately 20% of global crude oil and LNG shipments (S&P Global), has been effectively closed, raising the risk of potential disruption to global trade activity. Airlines are sensitive to fuel-cost volatility and may face immediate cost pressures, particularly U.S. carriers that do not hedge. While the broader implications for the airline industry continue to unfold, historical trends suggest that consumer travel demand has proven resilient and tends to rebound and stabilize following the initial shocks.

In a defensive asset class, balancing near-term geopolitical uncertainties with an expanding opportunity set positions investors to capture resilient long-term growth. The infrastructure market continues to exhibit robust growth, driven by megatrends such as AI and decarbonization, which are significantly influencing performance across segments like digital infrastructure, power and utilities, and renewables. While fundraising remains strong, it is characterized by heightened competition, scrutiny over valuations and geopolitical risks.