Infrastructure Quarterly: Q3 2025

Advancing transparency in private infrastructure

Investor sentiment is cautious due to concerns about real GDP growth, tariff-driven inflation and uncertain rate cuts. In the near-term, U.S. economic growth should be supported by tax cuts outlined in the OBBBA leading to a positive, near-term consumer spending impact. In the medium- to long-term, the forecasted rate of GDP growth slows down and inflation remains persistent. In a volatile environment, private infrastructure has delivered consistent performance over extended investment horizons.

A key milestone in advancing the transparency of the private infrastructure asset class is the introduction of the expanded MSCI private infrastructure asset index. It provides a consistent quarterly time series for more than 15 years and covers over 500 infrastructure companies with a total equity value of $223 billion. The index achieved an 11.5% rolling one-year total return, gross of fees (Figure 1). The rapid digitalization of our economies and the need for power are behind the growth and superior performance of data centers and power transmission and distribution companies.

Figure 1: Infrastructure, bonds and equities annualized total returns, %

Based on historical performance, the Americas (largely composed of U.S. and Canada) and the APAC region demonstrated greater stability with only a 1%-3% variation in performance across time horizons. The Americas remain in the lead in total returns and comprise over half of the MSCI index. Private infrastructure in the EMEA region has seen declining returns, shaped by a confluence of challenges, including the remnants of the pandemic, the energy crisis and weather impacts (Figure 2). Despite these headwinds, EMEA accounts for roughly one-third of the private infrastructure index, underscoring its strategic importance in a global portfolio.

Figure 2: MSCI Private infrastructure asset index, gross of fees, average annualized returns by region, %

Private infrastructure fundraising marked a pivotal rebound with $134 billion capital raised in H1 2025, nearly matching the high watermark set in H1 2022 (Figure 3). This momentum not only surpasses the entire fundraising in 2024 but also reflects renewed investor confidence. The asset class is known as a hedge against inflation and provides a reliable income stream. Mega fund closures have driven headline figures. According to Infralogic, 80% of the infrastructure capital flowed to five to six mega managers. Another trend is the resurgence of mid-market infrastructure funds, which has gained attraction as institutional investors seek differentiated, more agile strategies. Large platform companies may also face limited liquidity pools at the time of divestment.

Figure 3: Infrastructure fundraising value, $ in billions

Investor interest in infrastructure continues to grow, but regional preferences fluctuate. According to Preqin’ survey from June 2025, Western Europe emerged as the most favored market for infrastructure investment (Figure 4). Investor interest in the U.S. has softened, largely due to persistent uncertainty around the level of long-term interest rates and the implications of newly introduced federal policies.

Europe’s push for regional security and energy independence has emerged as a key driver of capital deployment. The U.K. government has signalled strong interest in expanding public-private partnerships to leverage private capital. Meanwhile, Germany’s recent parliamentary approval for increased defence and infrastructure spending reflects a broader political commitment to long-term strategic investment.

Figure 4: Investors’ views on the best regional opportunities, %

Renewables lead the charge in deal activity

Deal activity in private infrastructure points to a steady recovery with momentum building across global markets in H1 2025. Total transaction value reached just below $520 billion in the first half of 2025 (Figure 5a), positioning the market to potentially match the peak levels observed in H1 2022. This upward trend aligns with the rebound in fundraising.

Figure 5a: Private infrastructure dealmaking value by deal type, $ in billions

A closer look at dealmaking trends in H1 2025 reaffirms previous trends with a greater focus on greenfield investments while M&A activity has moderated. Capital deployed into new infrastructure developments reached $154 billion, a growth of 15% year-over-year (Y-o-Y). M&A activity reported its weakest first half as investors remain cautious amid ongoing market uncertainty. Sector-level data highlights renewables and digital infrastructure as key drivers of growth increasing by 48% and 33% respectively (Figure 5b).

The fiber network space is experiencing rapid expansion in the U.S. driven by increasing demand for high-speed connectivity across residential and commercial operations. T-Mobile closed an acquisition via a joint venture of MetroNet, a leading fiber-to-the-home provider. Through an investment of approximately $4.9 billion, T-Mobile will secure a 50% stake in the joint venture and full ownership of MetroNet’s residential fiber retail operations and customer base. Once the transaction is completed, MetroNet will operate as a wholesale provider, and customers will transition to T-Mobile. The initiative aims to extend fiber coverage to 6.5 million homes by 2030.

Figure 5b: Private infrastructure dealmaking, market share by sector, %

Power and utilities

As geopolitical tensions rise and global economic fragmentation deepens, governments are placing a greater emphasis on energy security as a strategic priority. Countries are increasingly designing energy systems around domestic resources to mitigate the risks of supply disruption and reduce reliance on imported fuels. In Europe, the ongoing Russia–Ukraine war and fossil fuel-poor areas led to accelerated investments in self-reliant renewable energy. In the U.S., the Trump administration reversed previous policies and is encouraging domestic oil and gas production. Sufficient and uninterrupted power supply is particularly important for data centers—critical infrastructure that facilitates the surge in AI-driven power demand.

Policy disruption and macroeconomic factors continue to exert a significant influence on the investment requirements and financial returns for utility companies. In a difficult financial and regulatory landscape, U.S. utilities are experiencing a widening gap between the average earned return on equity (ROE) and the authorized returns by regulators. The average annual earned ROE as of 2024 dropped to its lowest level in 15 years for both electric and gas utility companies driven by persistent inflation and elevated interest rates (Figure 6).

Figure 6: Electric utility companies’ average annual earned ROE and authorized ROE, %

Over the long term, utilities retain a monopolistic position as the sole providers of essential services regardless of economic or political conditions. Their regulated status and guaranteed demand make them uniquely resilient, even as the broader energy landscape evolves. In response to economic headwinds, U.S. utility companies have filed the largest volume of rate increase requests, totaling $16.4 billion in 2024. A potential rebound in earned ROEs is also needed to promote capital investment plans which have peaked at elevated levels.

Renewables

The One Big Beautiful Bill Act, signed into law on July 4, 2025, brought clarity on the fate of U.S. federal clean energy tax incentives. For the renewables sector, the most notable shift is the accelerated phaseout of investment and production tax credits compared to the original timelines in the Inflation Reduction Act (IRA). Wind and solar projects that begin construction within 12 months of the enactment date and are placed in service within four years remain eligible for full tax benefits. However, facilities not completed by the end of 2027 will no longer qualify.

New restrictions have been introduced to limit tax credit availability for foreign entities or foreign-influenced entities in critical energy supply chains. The foreign entity of concern (FEOC) narrows the pool of eligible participants, constraining the growth of clean energy initiatives in the U.S.

Battery storage benefits from more favorable treatment under the OBBBA. Energy storage is exempt from the 2027 deadline and will continue to follow the IRA schedule. Projects can begin construction through the end of 2033 to qualify for full tax credits. Partial credits will be provided for projects initiated after that date, provided they are FEOC compliant.²

In response to the legislation, developers are actively reprioritizing their portfolios by accelerating construction timelines to maximize tax credits and reduce FEOC exposure. According to LevelTen, U.S. power purchase agreement (PPA) prices have already risen by 4% following the bill’s enactment. Despite policy uncertainty, the renewables sector remains dynamic with solar and onshore wind maintaining a competitive edge (Figure 7). Compared to new gas turbines that come with long wait times, solar and onshore wind have shorter delivery schedules.

Figure 7: Estimated levelized cost of electricity (LCOE), 2025, $ per MWh

Digital Infrastructure

The digital infrastructure sector continues to experience robust growth, fueled by the accelerating digitalization of the global economy and widespread adoption of emerging technologies. Data centers are being constructed at an unprecedented rate driven by the exponential rise in cloud computing and the surge in AI workloads. Both use cases require high-performance computing and vast storage capacity. The International Data Corporation (IDC), a global market intelligence provider for digital infrastructure, projects global AI spending to reach $749 billion by 2028, with a five-year CAGR of 32.8% (Figure 8).

Figure 8: Worldwide AI spending and growth, 2023-2028, $ in billions

According to the International Energy Agency, global electricity demand from data centers is projected to double under the base case and triple in the upside scenario by 2030. AI is increasingly being deployed to optimize energy consumption and improve operational efficiency across digital infrastructure assets. AI-related demand remains a key driver of growth for large technology hyperscalers. In their latest earning releases, major technology firms—including Meta, Alphabet, Microsoft and Amazon have each raised their capital expenditure guidance by at least 30% Y-o-Y.

Uncertainty surrounding global trade and tariffs may lead to a moderation in IT spending, impacting mostly non-AI investments. The upside case for AI also remains uncertain with adoption rates and potential bottlenecks likely to influence the pace and scale of infrastructure expansion. A top priority for scaling AI globally is securing a reliable and sufficient stream of electricity to power energy-intensive data centers. Data center deployment is often delayed by power project backlogs, power grid constraints and complex supply chains.

Transport

The evolving global trade landscape and the strength of consumer spending may exert downward pressure on certain segments of the transportation sector. A rise in the overall U.S. tariff rate and potentially lower import cargo volumes is expected to contribute to a near-term decline in port container volume. Historically, port activity has closely mirrored broader economic trends and recent market volatility continues to challenge its stability.

S&P Global Ratings revised its transportation activity estimates lower than earlier projections citing increased trade tensions and tariffs. The agency forecasts a 4% decline in U.S. port container volume in 2025, followed by an additional 2% decrease in 2026. Vehicular traffic remains stable supported by strong road usage, while remote work dampens mass transit demand and softening economic conditions slow growth in airports.¹

Development of key infrastructure sectors such as transport is pivotal to the promotion of economic growth and development. According to new research by Allianz, emerging and developing markets are expanding at twice the pace of advanced economies fueling a rising demand for new infrastructure across transport, housing, water and energy. To keep up with the rising demands driven by urbanization and demographic shifts, non-energy infrastructure investments should amount to approximately 1% of global GDP or $11.5 trillion across various infrastructure sectors (Figure 9).

Based on the analysis, most global investment is estimated to originate from emerging markets and allocated to road infrastructure development. In developed nations, transportation infrastructure funding varies with the U.S. relying far more heavily on public investment compared to the U.K. and France where private sector involvement plays a more prominent role.

Figure 9: Non-energy infrastructure investment needs through 2035, $ in billions

Tactically, infrastructure investors are favoring Western Europe relative to the U.S. due to political uncertainty. However, U.S. infrastructure has historically outperformed Europe and its infrastructure market presents rich opportunities, uplifted by data centers and resurgent power demand. Long-term infrastructure projects tied to AI are proving resilient, with global power demand for data centers expected to more than double by 2030. Any upside from AI remains contingent on the resolution of power bottlenecks and commercially viable AI use cases.³

Infrastructure Quarterly: Q3 2025