BCG: Private Infrastructure Investment is Regaining Momentum
As the data centre industry continues to change, amid rising demands, a report by Boston Consulting Group (BCG) finds private investment in infrastructure is showing signs of recovery from last year.
As it regains its momentum, the report - Infrastructure Strategy 2025: How Investors Can Gain Advantage as the Asset Class Matures - describes how the private infrastructure market is now stabilising.
This comes in the wake of several uncertainties impacting the market and fluctuating deal volume, BCG says. Likewise, the report points to a shift in investor focus, with greater allocations to high-growth sectors such as digital infrastructure and energy transition.
Notably, infrastructure assets under management continued to grow over the past year that reached an all-time high of US$1.3tn as of June 2024. However, fundraising remains below its 2022 peak, suggesting that investors are remaining cautious.
Adapting to a new environment
The report finds that data centre investments, driven by AI and cloud computing demands, have been particularly strong. In fact, a record US$50bn was allocated to the sector in 2024, up from just US$11bn in 2020.
Despite a slowdown in deal flow across most infrastructure asset classes, BCG finds that investors are optimistic about long-term opportunities in core sectors such as energy, transport and logistics.
- US$87bn raised in infrastructure funds (2024)
- 8% decline in infrastructure transactions
- Renewable energy and battery storage solutions continue to attract interest
Although deal volume and dry powder fell in 2024 compared to the previous year, fundraising has grown by 14% since 2023 and 31% of limited partners plan to increase their allocation to infrastructure.
Significantly, the energy and environment sector remains the largest infrastructure asset class, which makes up 50% of infrastructure portfolio assets. However, BCG points to the fact that digital infrastructure is growing, largely on account of the rise of generative AI (Gen AI).
Gen AI has transformed the data centre industry as we understand it, placing greater levels of demand on operators to deliver customer requirements. As a result, larger levels of water and energy are being used to fulfil these promises, at the expense of the environment.
As a result, companies around the world are striving to find new ways to innovate, whilst keeping sustainability a priority. This is not an easy task, but often now starts at the design and build stages of data centre infrastructure development.
“Infrastructure remains a cornerstone of private investment strategies, offering stability and inflation protection in volatile markets,” says BCG Managing Director and Senior Partner Wilhelm Schmundt, the firm’s global lead for infrastructure investment and a coauthor of the report.
“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.”
Building the future
According to BCG’s report, infrastructure investors are now refining their strategies to remain competitive in an evolving market.
- Industry consolidation: ‘One-stop-shops’ for infrastructure investments
- Expanding investment mandates: Broadening product options
- Enhancing operational value creation: Adopting more active asset management strategies
- Exploring new fund structures: The rise of continuation vehicles, co-investments and sector-specific funds is providing limited partners with more tailored investment opportunities
Looking ahead, despite uncertainties in the near future, BCG’s report predicts that there will be continued growth in infrastructure investment. It highlights that this will particularly be the case in sectors that are driven by AI and digital transformation.
Governments worldwide are also increasingly looking to private investors to bridge gaps in infrastructure funding, which in turn is leading to plenty of co-investment opportunities.
Already in the UK, the government is welcoming international investors to support the growth of data centre infrastructure in the UK, citing that this is necessary for the country to become a leader in AI innovation.
“Private investment will be critical to modernising infrastructure and meeting the world’s growing connectivity and energy needs,” shares Alex Wright, BCG Managing Director and Partner, and 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.”
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