Investment Focus: How to invest in infrastructure: funds, trusts and returns explained
Written by Boring Money
23 Jan, 2026
Infrastructure investment involves buying assets in the physical systems that power economies - roads, utilities, energy networks, and data centres. With McKinsey estimating $106 trillion needed by 2040, this sector offers long-term growth potential driven by AI development, renewable energy transition, and government spending. Infrastructure assets typically deliver reliable, inflation-adjusted income, with the S&P Global Infrastructure index returning 15.11% annually over three years. Investors can access the sector through direct shares, investment trusts like 3i Infrastructure (£4.25bn), open-ended funds, or ETFs, with several Trusts currently trading at attractive discounts of up to 28.6%.
The infrastructure sector provides the rails on which an economy runs. It is the roads, power networks, water utilities, ports, bridges, or data networks. These are physical assets providing critical services that enable people to work, live, travel, and communicate.
It is a pivotal moment for infrastructure development. Countries around the world are increasingly making it a priority. It has always had a role in boosting economic growth, but there are also a range of global forces accelerating the need for infrastructure investment, including ageing assets, rapid urbanisation, geopolitical shifts, and technological advancements.
The 4D megatrends of decarbonisation, digitalisation, demographics, and deglobalisation have become commonplace trends in infrastructure, that remain significant drivers of investment. Private infrastructure investors are well positioned to fill the gap between infrastructure targets set by governments globally and the challenging fiscal and monetary environment facing public sector finances.
McKinsey estimates that a cumulative $106 trillion in investment will be necessary through to 2040 to meet the need for new and updated infrastructure.
The required investment spans seven critical infrastructure verticals, with transport and logistics requiring the largest share ($36 trillion), followed by energy and power ($23 trillion), digital ($19 trillion), social ($16 trillion), waste and water infrastructure ($6 trillion), agriculture ($5 trillion), and defence ($2 trillion).
Governments are making clear commitments to infrastructure spending. In 2021, President Biden signed the Bipartisan Infrastructure Law, which directed $1.2 trillion of federal funds towards transportation, energy, and climate infrastructure projects. This development is still underway. Germany has launched a €500 billion fund for infrastructure modernisation and to help with its transition from fossil fuels to low-carbon energy sources. At an EU level, the European Green Deal has channelled capital into green energy projects and grid updates. The Commission's Connecting Europe Facility is designed for transport projects.
There is also significant infrastructure development in emerging markets. Aberdeen's Senior Emerging Markets Economist Robert Gilhooly says emerging markets will account for around two-thirds of overall infrastructure spending over the next 25 years. The bulk of this is in transport and power generation. He adds:
China's $12 trillion expenditure on power generation is set to be the largest single infrastructure investment undertaken by any country, equivalent to almost a fifth of total global infrastructure spending.
It helps that infrastructure is productive spending. A 2022 World Bank Review finds that each dollar of public infrastructure spending generates $1.50 in additional economic output. This is why it is so popular with governments keen to boost living standards and generate employment.
How is AI changing infrastructure investment?
The build-out of AI capability is creating significant demand for energy, which is a structural support for infrastructure groups.
The need to power AI and the growth of data and compute it entails has led to explosive power and gas demand. Electric and gas utilities are investing heavily in building smart grids with improved demand response and in reliability and efficiency. Utilities have also greatly benefited; they are deploying large amounts of capex in the development and ongoing operation of data centres.
Tech sector capex for new data centres is expected to total US$6.78 trillion by 2030. According to various forecasters, the base case for global data centre power demand growth is 22% compounded annually to 2030, while investment in data centre construction should rise to US$49 billion per year by 2030. According to the International Energy Agency, in the United States, data centres are on course to account for nearly half of electricity demand growth through 2030—largely driven by AI usage.
Why is renewable energy important for infrastructure?
Gilhooly says rising power needs and the pivot towards renewable energy sources imply more than $27 trillion of expenditure. Aberdeen's models project that global generation capacity needs to rise from 8,000 GW to over 21,000 GW (+165%) by the middle of this century.
The pivot towards renewables – which require larger infrastructure investment costs upfront to replace an equivalent amount of thermal power capacity – explains around two-thirds of the rise.
The UK is a good example of the type of changes that are needed. The UK's grid system has been designed to transport electricity from coal- or gas-fired power stations around the country. Now, it needs to transport energy from intermittent sources such as solar or wind. This requires a rewiring of the grid systems, including the installation of batteries to store power for future use. National Grid launched the 'Great Grid Upgrade' in 2023, with new grid lines and distribution networks. This type of development is happening across the world, bringing real opportunities for infrastructure development.
What returns do infrastructure investments generate?
Infrastructure has generally had certain investment characteristics. Companies tend to have reliable cash flows, backed by long-term contracts. These will tend to increase in line with inflation. Investors should receive an inflation adjusted income, plus any appreciation in the value of the assets.
This means that infrastructure assets have tended to be a steady-eddie investment, where a significant part of the return will come from income. The S&P Global Infrastructure USD Hedged index has delivered an annualised return of 15.11% over the past three years. This puts it behind the return of the S&P 500 index of 23%. Over 10 years, the same figures are 10.38% and 14.82%.
The value of infrastructure assets tends to be sensitive to interest rates. When interest rates are higher, the value of these inflation-adjusted cash flows tend to fall because investors can generate the same type of return from a government bond or other low-risk assets. The sector had a difficult period in 2022 when interest rates rose rapidly.
The connection with a range of global themes is changing the investment opportunity over time.
It has long been considered that the dynamics of interest rates and yield curves were the primary drivers of sector performance. Investors keenly watched these indicators as signals about the economic cycle and appropriate portfolio positioning: risk-on vs. risk-off. However, times have changed as utilities have more growth than before, notably through the development of non-regulated activities, and considering them only as bond proxies is less appropriate as the sector evolves.
How can I invest in infrastructure?
Investors can invest directly in infrastructure shares.
These may include energy providers such as Iderdrola or Nextera Energy, or communications groups such as AT&T and Verizon. McKinsey says there is also a supporting layer of specialised services in maintenance, inspection, compliance, and remote monitoring that may be part of an infrastructure portfolio.Infrastructure Investment Trusts
There are three main infrastructure sectors in the Investment Trust sector. The main one is the infrastructure sector, which contains trusts that invest directly in infrastructure assets. Closed-ended funds are a good option to manage infrastructure assets. There is a fixed pool of assets, so it can be a better structure for managing illiquid assets
. Infrastructure assets are large and will take time to buy and sell.Within the infrastructure sector, the largest Trust is the £4.25 billion 3i Infrastructure fund. This is an international portfolio and includes companies such as Singaporean logistics group Oystercatcher, UK utilities group Infinis, or German communications group DNS:NET. The second largest Trust, £3.3bn HICL, which has predominantly UK assets, including the Home Office headquarters in central London, and Central Middlesex Hospital. The sector also holds a number of specialist trusts, including Digital 9 infrastructure and Cordiant Digital Infrastructure. The infrastructure securities sector is smaller, holding just one trust - Ecofin Global Utilities and Infrastructure.
Closed-ended funds may trade on a discount to the underlying value of the assets they hold. There are still some attractive discounts in the sector, with GCP Infrastructure Investments and HICL Infrastructure trading on discounts of 28.6% and 24.9% respectively. Historically, they have traded closer to net asset value
, even at a premium in some cases.For investors looking at the energy transition, there are a range of specialist Trusts in the Renewable Energy Infrastructure. The sector is now 17-strong, with Greencoat UK Wind the largest trust at £4.15bn. There are also solar and wind specialist Trusts.
Infrastructure funds
There is also a broad choice of open-ended funds, though these are often more focused on infrastructure shares rather than directly-held infrastructure assets. There are a few large, experienced management groups, including Clearbridge, Gravis, and M&G. These funds tend to be more generalist in their exposure. They may invest solely in the UK or Europe, or in global opportunities.
Infrastructure ETFs
Passive
funds will tend to replicate the performance of infrastructure securities. It is more difficult to replicate the performance of physical infrastructure assets. Options include the iShares Global Infrastructure ETF, or the SPDR S&P Global Infrastructure ETF, which both aim to replicate the performance of the S&P Global Infrastructure Index. There are also ETFs focused on emerging market infrastructure, only in the US, or only in sustainable infrastructure.Infrastructure investment can provide a ballast to a portfolio, delivering income and steady capital growth. There have been some anomalous years, such as 2022, and there are new sources of growth coming into the sector, but ultimately, these are tangible real assets and can provide healthy diversification to more glamorous areas such as technology.
-----
[1] Global Infrastructure Investment Association, May 2024
[3] S&P Global
[4] S&P Global
