The world has been rewired. The infrastructure required to support it has not yet caught up. That gap is where investors are paying closer attention.
Ares Management's comprehensive guide to private infrastructure arrives at a moment when the asset class is shedding its reputation as a quiet allocation to utilities and toll roads, and revealing itself instead as one of the most dynamic and consequential corners of private markets. Raj Dhanda, Partner and Global Head of Wealth Solutions at Ares, frames the opportunity plainly: "At Ares, we believe private infrastructure is central to building the next generation of global economic foundations, from renewable power and grid updates to digital networks and modern transportation. We believe the asset class can enhance portfolio resilience while providing access to essential, long-duration growth themes."
That framing is not rhetorical. It is analytical. And the guide substantiates it across every chapter.
The Funding Gap Is the Opportunity
Governments historically built infrastructure. After the Global Financial Crisis, they retrenched. An estimated $106 trillion in global infrastructure spending will be required through 2035, and the private sector is now expected to supply it. Annual private infrastructure deal volume has grown at a 26% CAGR over the past 15 years, reaching $413 billion in 2024. The structural tailwind is durable and accelerating.
The composition of that opportunity has shifted materially. The fastest-growing sectors are not traditional utilities but rather the buildout of what Ares calls the "New Economy", fiber, cell towers, data centers, battery storage, and power generation for an AI-driven world. One AI search query consumes roughly 10 times the processing power of a standard Google search. A video AI request can require 10,000 times more. Global data usage is projected to triple within five years. The infrastructure needed to process, transmit, and power that data does not yet exist at scale.
Not All Infrastructure Is the Same
The guide draws important distinctions that matter for portfolio construction. Private infrastructure sits across a broad risk-return spectrum: from Core and Core+ strategies, long-lived, contracted, cash-flowing assets with 30- to 40-year useful lives, to Value-Add and Opportunistic strategies targeting assets in late-stage development or early construction. Infrastructure debt adds another layer, offering floating-rate income with historically lower default rates than comparable corporate credit, at the Baa, Ba, and B rating levels.
The lifecycle of an asset matters. During the Development phase, lasting three to five years, risk is highest. Once an asset reaches the Operational phase, it stabilizes into predictable cash flow backed by fixed-price contracts with creditworthy counterparties. Core strategies invest here, which is why the Core/Core+ universe, at roughly $982 billion in AUM, dwarfs Value-Add and Opportunistic combined. Investors new to the asset class typically start with Core, and for good reason.
Private infrastructure has also outperformed its listed counterpart over the past 20 years with considerably less volatility. A $100,000 investment in private infrastructure in 2004 grew to $552,600 by end of 2024, compared to $411,300 for publicly traded infrastructure. On a risk-adjusted basis, the gap was 3.1 times more efficient, as measured by Sharpe ratio.
Portfolio Construction: Where It Earns Its Place
Over the past 20 years, private infrastructure delivered approximately 9% annualized returns, public equity-like returns, with closer to bond-like volatility. Core and Core+ strategies generate 50% or more of total return in the form of income. Correlation to aggregate bonds is effectively zero, while correlations to public equity, high yield, REITs, and listed infrastructure remain low to moderate. During high-inflation environments, private infrastructure has historically returned 6%, while publicly traded infrastructure delivered negative 2%. In the most severe drawdowns of the past two decades, private infrastructure fell 5% and 23% at their respective worst points, while public infrastructure fell 49% and 29%.
For advisors working with a traditional 60/40 framework, the guide models three allocation scenarios using a 20% private infrastructure carve-out. Funded from equities, the result is a 30-basis-point return improvement, 230-basis-point volatility reduction, and a Sharpe ratio roughly 30% better. Funded from fixed income, returns improve by 130 basis points without sacrificing yield. A blended approach improves both return and volatility simultaneously. These are illustrative examples, not guarantees, but the range of outcomes across all three scenarios is instructive.
Institutional investors have taken note. Average private infrastructure allocations among institutional LPs now stand at 6%, with private pensions targeting 8%, sovereign wealth funds 7%, and endowments and insurance companies 5%. Ninety-eight percent of institutions plan to maintain or increase their allocations.
Five Key Takeaways for Advisors and Investors
- The investment opportunity is structural, not cyclical. The $106 trillion global infrastructure funding gap through 2035 is a demand signal that does not depend on any single economic regime. Private capital is the only realistic source of supply.
- The asset class has evolved beyond traditional sectors. Data centers, fiber, cell towers, and battery storage now represent some of the fastest-growing segments. Advisors should ensure their private infrastructure exposure reflects the New Economy, not only legacy utilities.
- Core infrastructure belongs in the income conversation. With 50% or more of total return delivered as income, Core and Core+ strategies can function as an income alternative alongside or in place of fixed income, with the added benefit of inflation linkage.
- Drawdown behavior matters as much as returns. Private infrastructure's historical resilience during market stress, shallower drawdowns, positive performance during high inflation, is a meaningful portfolio characteristic for clients who cannot tolerate the volatility of public equities.
- Diversification is achievable without complexity. Ares' own quantitative research suggests that meaningful risk reduction is achieved within the first 30 assets and two geographies. For many investors, one to two well-constructed funds may be sufficient.
Private infrastructure is not a new asset class. But the forces driving demand for it, AI, electrification, digitization, decarbonization, and the retreat of government balance sheets, are genuinely new. The advisors and investors who understand it earliest will be best positioned to use it.
Footnote: Dhanda, Raj, et al. A Comprehensive Guide to Private Infrastructure: Essential Assets for an Evolving Economy. Ares Management Corporation, 2026. REF: 5251309.
