Highlights: The world has unwittingly entered a new normal in 2025 – one with higher tariffs, lower economic growth, and potentially higher inflation (depending on where the new US tariffs settle). In this new normal, public market assets are susceptible to gyrations and if there’s one thing that any investment portfolio needs, it is the good old diversification. However, as witnessed in H1 2025, conventional sources of portfolio diversification haven’t always worked in periods of market dislocations. Why? Because the negative correlation between stocks and bonds became positive (hence both sold off in tandem) signifying that the fixed income element may have lost some of its traditional hedging capability. As such, a standard 60/40 stock-bond portfolio may no longer be diversified enough. In this new regime, we believe investors need to diversify their diversifiers by allocating to other asset classes with different risk-return attributes vs. public markets. One such different source of diversification is infrastructure, which not only has a low correlation to conventional assets but also offers downside protection in an inflationary environment through its long-term contracts and CPI-indexed revenues. This makes infrastructure an all-weather asset class – a ‘Steady Eddie’ in layman terms - thanks to its defensive, consistent, and growing cash flow streams which are inflation hedged, making it an effective portfolio ballast, especially in times of public market dislocations.

Besides being shaped by the structural trends of ‘The Three D’s – Digitalisation, Decarbonisation and De-globalisation (i.e. the reshoring of supply chains requiring adequate physical and digital facilities), infrastructure is now being driven by new cyclical catalysts that are underpinned by geopolitical forces and economic imperatives.

We term these as ‘The Great Recalibration of Global Priorities’: 

1. Global governments’ focus on energy self-reliance and their unprecedented sense of urgency with regards to attaining energy security. 
2. Trump 2.0 policies prioritising American national interest – reshoring of manufacturing and ongoing buildout of AI infrastructure. 
3. Europe’s renewed commitment towards boosting defense and domestic infrastructure.

Due to a culmination of these structural and cyclical drivers, Infrastructure looks all set for its next multi-decade cycle, providing investors a broader opportunity set, especially at a time when copious volumes of undeployed private capital is targeting long-term, inflation-linked returns. As such, investors with long term investment horizons and an ability to withstand the illiquidity risk that comes with owning long life assets should reap the benefits of diversification and stable inflation hedged returns that private infrastructure offers.

For investors looking to deepen exposure to private markets, our private equity firms network can provide access to diversified, long-term opportunities that complement private infrastructure allocations.