The Rise of Infrastructure as a Dynamic Alternative Asset Class

The U.S. stock market has recently faced volatility driven by fears over trade wars, prompting investors to seek alternative asset classes that offer stability and growth. Among these alternatives, infrastructure has emerged as a standout choice, particularly for institutional investors, and is increasingly gaining traction among individual investors as well. Sean Klimczak, the global head of Blackstone’s $55 billion infrastructure business, emphasizes the growing importance of infrastructure in portfolio diversification. “As we think about where the world is going, we think alternatives—and infrastructure more specifically—have a home in individual investor portfolios,” he remarked during the Forbes/SHOOK Top Teams Summit in Miami.

Over the past 15 years, infrastructure investing has experienced exponential growth within the institutional landscape, with total capital invested surging from $150 billion to $1.3 trillion. Pension funds, for instance, have increased their allocation to infrastructure from 1% to 6% over the same period. However, private wealth and individual investors remain significantly underexposed to alternative investments, with only 1% to 3% of their portfolios dedicated to such assets, compared to pension funds at 35% and endowments at as high as 60%. Klimczak views this disparity as a missed opportunity, highlighting infrastructure’s unique benefits, including attractive returns, diversification, inflation protection, and yield.

The Case for Infrastructure: Stability, Returns, and Diversification

Infrastructure stands out as an attractive asset class due to its low correlation with global equities and bonds. With only a 60% correlation to global equities and a slight negative correlation to bonds, infrastructure offers a robust hedge against market volatility. Klimczak underscores its resilience, noting that infrastructure has outperformed global equities over the past 20 years while delivering half the volatility and twice the yield of the S&P 500. This makes it an ideal asset class for investors seeking stability in uncertain economic conditions.

Blackstone’s infrastructure strategy focuses on “hard assets or concession businesses,” such as regulated or contracted enterprises, which are inherently less volatile and better equipped to pass through inflation. Klimczak explains, “We look for businesses with significant barriers to entry and the ability to maintain steady cash flows regardless of market conditions.” This approach has driven Blackstone’s success in the infrastructure space, as evidenced by its recent fundraising efforts. In January, the firm raised over $1 billion for a new infrastructure fund, BXINFRA, targeting wealthy individuals with at least $5 million in assets. This move reflects Blackstone’s growing emphasis on catering to private wealth as individual investors increasingly turn to alternative investments.

Blackstone’s Infrastructure Strategy: Targeted and Forward-Looking

Blackstone’s infrastructure investments span a wide range of sectors, from digital infrastructure to utilities and transportation. One notable example is AirTrunk, the largest data center operator in the Asia-Pacific region, which Blackstone acquired for $16 billion in September 2024. AirTrunk benefits from long-term leasing contracts and a rapidly growing demand for data storage, with expectations that the sector will triple in size over the next six years. Klimczak highlights the high barriers to entry in this space, making it an attractive and defensive investment.

In the utilities sector, Blackstone has invested in companies like Northern Indiana Public Service Company (NIPSCO), a regulated utility with low volatility and projected annual growth of over 10% for the next decade. Similarly, in transportation, the firm acquired Safe Harbor Marinas, the largest marina operator in the U.S., for nearly $6 billion. Klimczak points to the strong demand for boat ownership and the declining supply of marinas as a compelling supply-demand imbalance, with Safe Harbor’s customer retention rate of over seven years further underscoring the business’s stability.

Europe’s Infrastructure Opportunity: Undervalued and Resilient

Another key area of focus for Blackstone is European infrastructure, which Klimczak describes as “the biggest dislocation we see today.” European infrastructure assets are trading at their largest discount to U.S. assets in two decades, driven by broader economic concerns rather than fundamental weaknesses. Klimczak believes many of these assets remain sound, offering strong cash flows regardless of market conditions. Blackstone’s European investments include the Rome airport and ASPI, one of the largest toll road operators in Europe. These businesses are essential and recur