As the U.S. stock market falls on trade war fears, infrastructure is emerging as a dynamic and fast growing alternative asset class for institutional investors–and possibly, individuals too.
“As we think about where the world is going, we think alternatives—and infrastructure more specifically—have a home in individual investor portfolios,” Sean Klimczak, global head of Blackstone’s $55 billion infrastructure business, said in an interview after speaking on stage at the third annual Forbes/SHOOK Top Teams Summit in Miami last week.
Over the past 15 years, infrastructure investing has seen an eightfold increase in the institutional world, with capital invested surging from $150 billion to $1.3 trillion. Among pension fund allocations, Klimczak says, infrastructure has grown from 1% to 6% during the same period.
Despite such growth, private wealth and individual investors remain underexposed to alternative investments, including infrastructure. According to Klimczak, they hold just 1% to 3% of portfolio assets in all alternative investments, compared to pension funds at 35% and endowments as high as 60%. Klimczak sees this as a missed opportunity.
Infrastructure provides attractive returns, diversification, inflation protection, and yield, he argues. More to the point in the current climate, with only a 60% correlation to global equities and a slight negative correlation to bonds, infrastructure offers an ideal hedge against market volatility. “This is an asset class that has outperformed global equities over the last 20 years while offering half the volatility and twice the yield of the S&P 500,” he says.
In January, Blackstone raised more than $1 billion for a new infrastructure fund, known as BXINFRA, geared toward wealthy individuals with at least $5 million. It is the latest sign of the firm’s growing private wealth business as more individual investors turn to alternative investments like infrastructure.
As the asset class has grown, the definition of what qualifies as infrastructure has evolved beyond the traditional notion of bridges and tunnels. While some investors have broadened the term, Klimczak says Blackstone’s approach remains consistent. “We look for hard assets or concession businesses—they have the ability to pass through inflation, have significant barriers to entry and generally have less volatility,” says Klimczak. “We’re big believers in regulated or contracted businesses for that reason.”
One example is AirTrunk, the largest data center operator in the Asia-Pacific region, which Blackstone acquired for $16 billion in September 2024. With a footprint twice the size of its nearest competitor, the company benefits from long-term leasing contracts, notes Klimczak. Demand is expected to triple in the next six years and the sector has high barriers to entry due to the massive scale and power requirements of these projects.
Beyond Blackstone’s big bets on digital infrastructure—it is the largest data center investor in the world, with an $80 billion portfolio–the firm also likes utilities like Northern Indiana Public Service Company (NIPSCO), one of the fastest-growing companies of its kind in the U.S. “It’s a regulated utility with relatively low volatility—roughly 50% less than the S&P 500—but is expected to grow more than 10% per year for the next decade,” Klimczak says.
In transportation, Blackstone last month acquired Safe Harbor Marinas, the largest marina operator in the United States, for just under $6 billion. Boat ownership demand has remained strong but overall marina supply has been declining, so the firm sees a compelling supply-demand imbalance, says Klimczak. “The average Safe Harbor customer has been with the company for more than seven years—this is a business with long-term customer relationships and attractive growth potential.”
Meanwhile, Klimczak calls European infrastructure holdings “the biggest dislocation we see today,” trading at their largest discount to the United States in two decades. He believes many European infrastructure assets remain fundamentally sound, yet are trading at a deep discount due to broader economic concerns. Blackstone’s investments in European infrastructure include assets like the Rome airport and ASPI, one of the largest toll road operators on the continent. Klimczak describes both examples as essential businesses that maintain strong cash flows regardless of market conditions.
As investors navigate an uncertain economic landscape, Klimczak believes infrastructure remains uniquely positioned. “There is always uncertainty,” he says. “The Fed has not gotten inflation down and we’re now in a higher-rates-for-longer environment.” But in his view, that’s exactly when infrastructure proves its worth, providing protection against rising costs and market volatility. “Eighty percent of our revenues are inflation-linked or have price escalators,” he says.
Private capital, Klimczak argues, will also play an increasingly important role in closing the infrastructure funding gap. “It’s abundantly clear that federal and state governments lack the necessary capital,” he says. “Private markets will have to assist.”
His approach at Blackstone remains the same: Focus on hard assets, balance the portfolio across sectors and invest behind industries that are growing faster than GDP. “It allows us to position ourselves in the center of our skis for a variety of different environments,” Klimczak says. “Toll roads and airports don’t care about the S&P.”
