Assets under management by private infrastructure investors are forecast to reach a record $1.19 trillion in 2022, according to a new report by Boston Consulting Group and EDHECinfra.
Interest in the asset class is being fuelled by significant increases in government infrastructure spending in China, the European Union and the U.S. A few areas are securing significant investments from governments, including power generation and renewable energy facilities, schools, hospitals, water resources and transportation projects.
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Another area that’s attracting significant government interest is digital infrastructure projects, particularly those related to the building of networks of fibre optic cables. These cables allow for 5G internet signals to be transmitted with 10-times the strength of over-the-air networks. The construction of these networks is unlikely to be pursued without the support of private investors due to the scale of these projects, which the authors describe as “herculean.”
“. . . Building out national fibre infrastructures will be a herculean task in virtually every country, requiring the replacement of fixed infrastructure that was built in the 19th century.”
Demand for fibre optic network development is highest in poorer countries, including Brazil, Nigeria and South Africa, though the report noted that opportunities for institutional investors exist in more developed economies as well. In China, about 80 per cent of telecommunications networks serving businesses already rely on fibre optic networks. In North America and Europe, about 85 per cent of consumers in urban areas have access to these networks, but penetration has not reached 40 per cent in rural areas.
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According to the report, institutional investors may be able to participate in public-private partnerships in markets where governments are seeking to expand fibre optic networks into rural regions. These opportunities may be especially tantalizing in the world’s wealthiest regions. Last year, the U.S. earmarked US$40 billion to providing access to 5G networks in rural regions. In Europe, a quarter of infrastructure spending is expected to go toward digital projects in 2022.
“Given the strong connection between fibre infrastructure projects and economic improvements, governments are beginning to move funds in the direction of these efforts, giving fibre network companies yet more motivation to jump wholeheartedly into the market and investors to move funds into public/private ventures involving fibre optics.”