No Limit on Opportunity: Mid-Market Core+ Infrastructure Thrives in Open-End Funds

Executive summary

Mid-market infrastructure has outperformed the large-cap segment on both an absolute and risk-adjusted basis for a decade. Yet one structural advantage remains widely overlooked: the open-end fund format.

Mid-market management teams perform best when freed from the pressure of exit planning to focus on value creation. Open-end funds provide a longer ownership horizon and genuine flexibility for growth, value creation and exit timing. Investors also have advantages; open-end vehicles offer enhanced liquidity, efficient capital deployment, transparent valuations and a reduced J-curve.

This report explores how mid-market infrastructure investments—and investors—can benefit from open-end structures.

Highlights

• Mid-market infrastructure—unlisted companies with an enterprise value of $500 million to $2 billion¹—has outperformed the large-cap segment while offering diversification, a superior risk-reward profile and clearer exit pathways to a growing pool of large-cap buyers.
• The open-end format’s longer investment horizon suits the multi-year growth cycles of mid-market assets and removes the exit pressure that constrains closed-end vehicles.
• Regular net asset value (NAV)-based valuations and enhanced liquidity make open-end funds increasingly attractive to limited partners, while also allowing investors to increase or decrease positions.
• Further economic advantages include efficient capital deployment, a reduced J-curve, portfolio flexibility, better liability matching and lower fees.

Mid-market infrastructure has produced strong risk-adjusted returns

The mid-market segment generated close to $500 billion in annual transaction volume across more than 1,300 deals over the past five years. The larger and more opaque universe of mid-market infrastructure companies creates opportunities for investors to develop information and execution advantages.

These characteristics have delivered durable alpha over large-cap core infrastructure. The 100 largest unlisted mid-market companies have outperformed core infrastructure across both five- and 10-year periods, generating imputed annualized returns of roughly 13% vs. less than 9% for core assets (Figure 1).²

Risk-adjusted returns are equally compelling: Sharpe ratios are 1.2 and 1.3 over five and 10 years, respectively, vs. 0.6 and 0.7 for core infrastructure (Figure 2).³

Figures 1 and 2: Comparison of mid-market and core infrastructure five- and 10-year annualized returns (left) and Sharpe ratios (right)

Downside metrics reinforce the strong risk-reward profile. EDHECinfra data shows that return volatility and maximum drawdown for mid-market infrastructure compare favorably with the global index and core infrastructure across five- and 10-year periods.⁴

Mid-market infrastructure’s compelling performance reflects distinct value-creation opportunities at every stage of the investment lifecycle, without sacrificing the inflation protection (such as CPI-linked or regulated revenues) that comes with infrastructure investing:

• On acquisition, relationship-driven bilateral deals face less competition and offer lower entry multiples than the broadly marketed auctions that dominate large-cap deal flow. 
• Throughout the holding period, organic and inorganic growth opportunities abound, and smaller company size creates natural platform-building potential. 
• Clear exit pathways exist, including a broad buyer pool of mid-market, large-cap and mega-cap funds, which promotes competition for the strongest assets. This dynamic also offers a potential “graduation premium”: mid-market assets acquired at lower entry multiples can be sold to large-cap buyers at higher multiples—a structural return advantage for mid-market players.

Open-end funds provide mid-market infrastructure with a longer runway for growth before exits

Value of long-term ownership

The open-end structure is a natural fit for secular megatrends, such as energy transition and digitalization, that unfold over 10–20 years. The typical three- to five-year closed-end investment period is poorly aligned with management teams who are often founders interested in creating enduring long-term value.  For example, one charging infrastructure company chose an open-end partner specifically to escape the exit pressure of closed-end structures. Data centers will face a similar challenge as investment horizons now routinely exceed 10 years; an open-end fund can compound returns across that full horizon, unconstrained by fixed fund terms.

Market conditions can also shift unexpectedly and open-end funds have the flexibility to adapt. We invested in a U.S. mobile-tower platform positioned to benefit from network carrier 4G and 5G densification. Within 12 months, structural and macroeconomic pressures converged to drive aggressive carrier cost-cutting, compressing tower growth plans. Free of deployment pressure from fixed investment periods, we paused new build activity, preserved capital and maintained close engagement with the network carriers. As carrier balance sheets stabilized, we resumed capital deployment in line with their updated growth priorities. The open-end structure was critical to providing us with this flexibility.

Importantly, the open-end format enhances our credibility with stakeholders—management teams, partners, regulators and communities—by positioning us as a genuine long-term owner. Stakeholder engagement and buy in is increasingly critical to successful infrastructure ownership, especially for mid-market companies that are often at an earlier stage of growth.

Flexibility improves exit options

While an open-end fund can enhance mid-market investments, investors are also attracted to structural benefits of these vehicles.

Private market valuations face mounting regulatory scrutiny, driven in part by large investors, such as pension funds, that offer products to retail clients; this creates more trading activity and demand for more frequent and transparent pricing. Open-end funds address this need directly through regular and robust processes to determine NAVs. As a result, these funds support greater liquidity than closed-end structures and protect limited partners with varying liquidity needs or transparency obligations to their own investors.

Open-end funds offer further potential economic benefits for investors

Open-end funds offer further economic advantages beyond liquidity and valuation transparency.

• Efficient capital deployment: Capital is deployed faster and held for longer, generating higher multiples on invested capital over time (Figure 3), particularly when investors reinvest distributions. Quicker drawdown and greater time in the market amplify the compounding effect.
• Limited J-curve and blind-pool risk: Investors gain immediate portfolio visibility and cash distributions from an existing, yielding portfolio, bypassing the J-curve drag of a closed-end fund’s early deployment phase. Portfolios built across multiple economic cycles also diversify vintage risk.
• Dynamic rebalancing: Investors in open-end funds benefit from enhanced liquidity, allowing them to redeem in response to changes in investment objectives, use the fund as a portfolio balancing tool alongside closed-end strategies to maintain a targeted infrastructure allocation and undertake tactical redemptions to crystallize deferred valuation gains into higher cash proceeds.
• Lower fees: Open-end funds carry lower management and performance fee rates, charge nothing on committed capital and eliminate the need for continuation vehicles.
• Diversification: Investors benefit from immediate diversification, avoiding the early‑stage risk concentration typical of closed‑end funds. Open‑end structures also help investors spread risks efficiently. Their evergreen capital base enables portfolios to grow and diversify across sectors and geographies over time, reducing both vintage and concentration risk.
• Liability matching: The open-end structure aligns with long-dated institutional liabilities for pension funds and insurers. While closed-end funds must return capital at a fixed date, open-end funds allow capital to remain invested, matching asset duration to liability duration.

Figure 3: Net cashflow and net TVPI for $100 million investment in an open-end vs. closed-end fund

Conclusion

Mid-market infrastructure has demonstrated a consistent ability to generate diversified, attractive and resilient returns, supported by identifiable value creation levers and clear exit pathways. Aligning this segment with an open-end fund structure strengthens the proposition: it provides the longer ownership horizon needed for platform building, supports growth across multi-year megatrends and reduces the pressure to time exits prematurely. At the same time, features such as frequent valuations, enhanced liquidity and efficient capital deployment offer investors transparency, flexibility and improved economic outcomes over the long-term. Together, this combination creates a robust and well aligned framework for accessing mid-market opportunities while meeting the evolving expectations of institutional investors.