LPs Focusing on Infrastructure Investment at Pivotal Time
Infrastructure fundraising hasn’t hit its 2022 high-water mark, but the appetite is picking up. According to a Boston Consulting Group (BCG) LP survey, 31% of limited partners are gearing up to boost their infrastructure allocations in 2025—it’s clear they’re eyeing the long-term growth potential. Even with deal volume dipping in 2024, BCG’s numbers say fundraising’s still chugging along at a 14% year-over-year clip. It’s a bit of a disconnect: fewer deals, but more cash piling in.
“Infrastructure remains a cornerstone of private investment strategies, offering stability and inflation protection in volatile markets,” said BCG managing director and senior partner Wilhelm Schmundt, the firm’s global lead for infrastructure investment and a coauthor of the report, How Investors Can Gain Advantage as the Asset Class Matures.
“As investors adjust to a maturing market, we see significant opportunities emerging in energy transition, digital infrastructure, and new investment structures designed to attract capital,” he added.
Investors are climbing the risk ladder to diversify and tap into infrastructure assets with strong growth prospects. They’re also drawn to opportunities that allow for significant capital expenditure increases or assets that can be stabilized and shifted into core or core-plus categories. It’s a smart pivot: balancing the lure of growth with the chance to lock in stability down the line.
LP Demand
BCG pointed out how GPs are pulling out all the stops by expanding their geographic reach to reel in new allocator cash, offering attractive co-investment structures, letting allocators get in with less upfront risk, maybe even better returns if the deal goes well, and opening the door to retail investors.
By expanding geographically, GPs can connect face-to-face with LPs in a region, getting a clearer read on their needs and crafting customized opportunities that match local market trends. This has been especially true in the Middle East. Take KKR’s move in January, snapping up a stake in Gulf Data Hub—one of the region’s biggest independent data center platforms—as a prime example.
Co-investment funds are pulling in LPs who want a front-row seat to cherry-pick their deals, and BCG’s betting this trend will continue. Generous co-investment setups are a win-win for managers: they lock in capital for specific projects while tightening bonds with LPs, which can lead to bigger allocations down the road. BCG’s analysis shows the top 20 infrastructure GPs have ramped up co-investment funds by 31% annually since 2019, based on fund vintage year.
In the retail arena, firms like Hamilton Lane and Pantheon have been rolling out infrastructure funds lately, tailoring them with different minimums and client targets to pull in a broader investment group. They’re also offering better liquidity options, which sweetens the deal. BCG’s report flags retail investors as a goldmine that’s barely been touched—a largely untapped pool of potential capital. Up until now, the pickings were slim for high-net-worth individuals and family offices looking to get into infrastructure assets.
With fundraising picking up steam at 14% year-over-year, it’s interesting that dry powder took a 9% dip by July 2024 compared to the end of 2023. As fundraising accelerates, dry powder is also expected to rebound commensurately, BCG reported.
Eye Digital infrastructure
The rise of digital infrastructure, particularly data centers, fueled by the AI surge, is increasingly catching the eye of both GPs and LPs. BCG’s estimate that $50 billion flowed into data center infrastructure in 2024—more than double the $22 billion from 2023—underscores how fast this space is heating up. That’s a massive jump, and it tracks with the AI boom driving demand for computing power.
Recognizing the capital-hungry nature of data centers—investors are leaning hard into joint ventures and co-investments to scale up fast, according to BCG. Take the Canada Pension Plan Investment Board teaming up with Blackstone strategies to buy AirTrunk for more than A$24 billion ($16 billion), or DigitalBridge and Silver Lake making a $6.4 billion investment in Vantage Data Centers. These aren’t small bets. Hyperscalers like Google or Amazon can’t foot the whole bill for this buildout—private capital has to step up to meet that massive spike in demand.
“Private investment will be critical to modernizing infrastructure and meeting the world’s growing connectivity and energy needs,” said Alex Wright, BCG managing director and partner, and a coauthor of the report. “With capital deployment expected to accelerate in 2025, we anticipate a more dynamic investment landscape, particularly in AI-driven infrastructure, renewables, and smart grids.”
