As we stand on the precipice of 2024, German asset manager DWS has released its Infrastructure Strategic Outlook for the year. The report brings a breath of fresh air, signaling the stabilization of the infrastructure market and a positive outlook for fundraising and transactions.
The Rebound of Infrastructure’s Fundraising Momentum
In the fourth quarter of 2023, there was a notable increase in fundraising for unlisted infrastructure. This uptick is expected to continue into 2024, with the year projected to see a significant recovery in infrastructure’s fundraising momentum.
Infrastructure as an Asset Class: The report underscores the significance of infrastructure as an asset class, particularly in the current economic climate. Stable and reliable cash flows, along with inflation protection and diversification benefits, make infrastructure investments an attractive proposition for investors.
Opportunities in the Midmarket: A Focus on Transport
The DWS report highlights the opportunities in the midmarket, specifically in the transport sector. As the world emerges from the shadow of the pandemic, there is expected to be increased activity in this sector in 2024.
The transport infrastructure market is poised for growth, driven by the need for modernization, expansion, and the increasing demand for sustainable and resilient infrastructure. Investments in this sector not only offer attractive returns but also contribute to economic growth and social development.
Infrastructure Investments: Case Studies
The strength and resilience of infrastructure investments are echoed by JPMorgan Chase CEO Jamie Dimon, who describes the bank’s balance sheet as a ‘fortress’. This metaphor encapsulates the robustness of these investments and their ability to withstand economic turbulence.
Warren Buffett’s BNSF Railway and Bayo Ogunlesi’s Global Infrastructure Partners (GIP) are prime examples of investors who have made substantial investments in critical infrastructure assets. These investments are not only a testament to the confidence in the infrastructure sector but also a strategic move to capitalize on the long-term benefits of these assets.
Even in emerging markets, the potential for infrastructure investments is being recognized. For instance, Nigerian state governments are exploring the possibility of raising funds through Naira-based bonds to finance infrastructure projects. The repayment for these bonds would be guaranteed by international development finance institutions, offering a safeguard against currency losses.
The interest and equity returns from these investments could help mitigate currency losses, providing a win-win situation for both investors and the governments. This innovative approach to infrastructure financing could potentially pave the way for similar initiatives in other emerging markets.
As the world gears up for a post-pandemic recovery, the role of infrastructure investments in shaping the economic landscape cannot be overstated. The DWS Infrastructure Strategic Outlook for 2024 serves as a beacon, guiding investors towards the opportunities and potential of this resilient asset class.