Digital Infrastructure: A path to sustainable development and resilience
Another trend shaping Infrastructure investments is the ongoing rise of public demand for digital and smart infrastructure.
The World Economic Forum has been advocating for an inclusive, secure, and equitable digital infrastructure for the world for years, and private investment in this area can help build the foundation for shared global infrastructure. Asset managers are also keen to align their investment thesis with EU’s Digital Decade policy program2, with concrete targets and objectives for 2030.
According to Infrastructure Investor data, digital assets accounted for 31% of total asset class fundraising, the highest share on record3. This developing interest in digital infrastructure has been supported by headwinds in growing digital infrastructure needs namely, data centers, fiber optic network, servers. With the United Nations projecting that two-thirds of the world's population will live in urban areas by 2050, urbanization is also expected to stimulate the high demand in technology and digital assets, as well as broader smart city projects.
Inflation-resilient Infrastructure: A stable return in uncertain times
The current inflationary backdrop may provide a positive push to infrastructure fundraising, as these assets often have longer-term inflation-linked contracts. This acts an attractive hedge that helps outperform global stocks and bonds returns during inflationary periods. The demand for investments in infrastructure assets, because of their ability to pass along inflationary costs, is expected to increase in the short-term.
Luxembourg, as a leading cross-border hub for alternative funds, offers a wide range of infrastructure fund products for investors. The country has seen a raise in the establishment of infrastructure funds, managers, and investment platforms, which is expected to continue in 2023.4