As global markets navigate uncertainty, the allure of infrastructure investments has never been more pronounced.

These assets provide a stable, inflation-protected return due to their defensive nature and essential services.

From utilities to data centers, they form the backbone of modern economies, offering resilience in turbulent times.

The Defensive Nature of Infrastructure

Infrastructure assets are inherently resilient, thanks to long-term contracts and regulatory frameworks.

They span public and private sectors, including utilities, airports, and toll roads.

This diversity ensures steady cash flows, making them attractive for investors seeking predictable, long-term growth.

In 2025, listed infrastructure delivered strong returns, setting a robust stage for 2026.

The defensive characteristics help shield portfolios from economic downturns.

2026 Outlook: Key Drivers Shaping the Future

The outlook for infrastructure in 2026 is driven by several transformative trends.

• AI and Data Centers: Explosive growth is fueling unprecedented electricity demand, with hyperscalers securing 15- to 20-year contracts.
• This spurs investments in smart grids and reliability enhancements.
• Decarbonization and Electrification: Long-term capex cycles are emerging for energy grids and renewables.
• Projects focus on climate resilience, such as upgrading poles and wires networks.
• Resiliency and Aging Infrastructure: Capex is directed at replacing facilities and climate-proofing assets.
• Supply chain realignment supports regulated returns, bolstered by 2025 AI power demand.
• Policy and Macro Tailwinds: Global fiscal policies and onshoring efforts enhance stability.
• GDP-sensitive assets like airports benefit from these supportive environments.

These drivers underscore the sector's dynamic growth potential and adaptability.

Valuing the Unseen: Core Methodologies and Metrics

Valuing infrastructure requires precise methodologies to capture its stable cash flows.

The primary approach is discounted cash flow (DCF) modeling.

This incorporates inflation protection and asset-specific risk premiums.

• Core Approaches: DCF models are based on predictable cash flows, adjusting for construction and regulatory risks.
• Tools like sensitivity analysis help manage uncertainties.
• Multiples: EV/EBITDA multiples are key, with utilities trading at decade-low ranges.
• This indicates undervaluation despite higher earnings growth from capex.
• Challenges: Volatility from capex for decarbonization and refinancing needs requires expert judgment.
• International Valuation Standards guide consistent practices.

Accurate valuation ensures attractive pricing amid strong earnings, enhancing investment appeal.

Public vs. Private: Navigating the Investment Landscape

Understanding the differences between public and private infrastructure is crucial for investors.

Public assets offer daily liquidity and are suitable for liquidity-constrained portfolios.

Private assets provide superior long-term returns with lower observed volatility.

This comparison highlights key trade-offs in liquidity and performance.

• Public Infrastructure: Includes resilient services like utilities and airports, with regulatory earnings stability.
• It benefited significantly from 2025 AI demand surges.
• Private Infrastructure: Shows outperformance over 10-20 years, with lower volatility from non-daily pricing.
• However, it faces challenges like valuation subjectivity and benchmarking limitations.

Investors must weigh these factors to align with their financial goals and risk tolerance.

Mitigating Risks: Practical Considerations for Investors

While infrastructure offers stability, it is not without risks that require careful management.

• AI Tailwinds: Contract protections mitigate dependencies, but monitoring hyperscaler relationships is essential.
• This ensures long-term viability amid rapid technological shifts.
• Valuation Volatility: Capex for decarbonization and electrification introduces uncertainty.
• Refinancing needs, such as for renewables, require proactive planning.
• General Risks: Economic volatility can impact defensive assets, though infrastructure tends to be resilient.
• Material events may necessitate adjustments to valuation models.
• Private-Specific Risks: Manager discretion in methodologies can lead to potential bias.
• Implementing control procedures for data validity is critical.

By addressing these, investors can enhance portfolio resilience and returns.

Expert Insights and Best Practices

Industry experts provide valuable guidance for navigating this complex landscape.

Nick Langley of ClearBridge notes that infrastructure valuations look attractive due to transparent spending and returns.

Charles Hamieh highlights the structural nature of hyperscaler contracts, offering long-term guidance.

EY emphasizes the subjectivity in adjusting discount rates for capex volatility.

Meketa points out that private infrastructure has outperformed public with lower volatility.

• Best Practices: Document processes and benchmark assumptions to ensure accuracy.
• Use event-driven adjustments and adhere to recognized standards like International Valuation Standards.
• Conduct independent annual model reviews to mitigate risks in private valuations.
• Focus on assets with long-term contracts and regulatory support for stability.
• Diversify across public and private sectors to balance liquidity and returns.

These insights empower investors to make informed decisions in a dynamic market.

Conclusion: Embracing the Future of Infrastructure

Infrastructure assets represent a compelling opportunity for growth and stability in 2026 and beyond.

With drivers like AI demand and decarbonization, the sector is poised for robust expansion and innovation.

By mastering valuation techniques and understanding public-private dynamics, investors can unlock significant value.

Embrace these assets as a cornerstone for building resilient, future-proof portfolios in an uncertain world.

Let this guide inspire practical steps toward harnessing the power of essential infrastructure.