Once pigeonholed as a conservative, yield-focused space, listed infrastructure is now proving both defensive and dynamic – underpinned by long-term policy tailwinds, structural growth trends, and valuation dislocations offering compelling entry points.
David Costello, portfolio manager at Magellan Asset Management, and Warryn Robertson, portfolio manager at Lazard Asset Management, both argue that the sector deserves a core allocation in diversified portfolios, not only for its inflation protection and predictable returns, but also for its growing role in the global energy transition, digital connectivity, and climate resilience.
“Infrastructure is one of the few asset classes that offers true diversification, resilience, and now, genuine growth,” Costello said. “At a time of heightened uncertainty, that combination is hard to ignore.”
The transformation underway in listed infrastructure is driven by megatrends such as electrification, decarbonisation, AI, and ballooning data demand. These trends are reshaping traditional perceptions of infrastructure as sleepy or low-growth.
Magellan’s Costello pointed to electricity demand from data centres and the evolving regulatory environment supporting network upgrades as forces lifting the growth outlook.
“We see profoundly powerful structural tailwinds supporting the structural growth in these assets,” Costello said.
This is echoed by Robertson, who highlighted European utilities – including National Grid, Terna and Snam – which are trading at 20-year valuation lows despite strong earnings forecasts.
“Our view of European regulated infrastructure can be best surmised as ‘boring but booming’,” he said.
“The growth outlook for European regulated utilities is stronger than it has been in decades,” he added, citing forecasts for nearly 10 per cent annual earnings growth for some pockets of listed infrastructure through 2029, more than double the previous decade.
Dislocations open the door
Recent market dynamics have revealed a growing disconnect between listed infrastructure valuations and those observed in private markets.
Costello pointed to Magellan’s holdings in UK-listed water utilities, such as Severn Trent and United Utilities, which in the third quarter of 2023 were trading at valuations equivalent to their regulatory capital value, a level he described as unusually low given their strong fundamentals.
“These assets are extremely high-quality,” he said, contrasting them with the challenges faced by highly leveraged, unlisted peers like Thames Water.
That thesis, he said, is already being vindicated in 2025, with these assets delivering strong returns.
Listed infrastructure also provides more timely price discovery and greater transparency than its private counterparts, he noted.
“The relatively observed volatility of unlisted infrastructure assets is, in part, just an artefact of not measuring the performance in those assets,” said Costello.
While private infrastructure valuations are often model-based and updated infrequently, listed markets reflect real-time investor sentiment, which he noted can create short-term volatility – but also tactical opportunities.
Stability meets upside
In performance terms, listed infrastructure has delivered.
Lazard’s Global Listed Infrastructure Active ETF (Cboe: GIFL) returned 20.6 per cent in the 12 months to 31 May, outpacing the MSCI World Index’s 10.1 per cent gain, and doing so with lower volatility.
This ability to blend equity-like growth with bond-like defensiveness makes the sector a powerful diversifier.
“Listed infrastructure sits between equities and bonds,” said Robertson. “Historically, it has provided higher income and lower volatility than equities, with more growth than fixed income.”
With some listed infrastructure assets now trading at their steepest discounts to global equities in over two decades, the case for inclusion grows stronger.
“Some of the world’s most sophisticated institutional investors allocate between 10 per cent to 20 per cent of their portfolios to infrastructure for long-term stability, yield, and inflation protection,” said Robertson.
Not an either/or
Both Costello and Robertson caution against framing the listed versus unlisted infrastructure debate as a zero-sum choice, arguing that each plays a different role in a portfolio.
Listed infrastructure delivers long-duration, low-volatility returns from high-quality assets like regulated utilities and toll roads – sectors defined by pricing discipline and limited operational upside. Private equity, by contrast, targets more complex or transitional assets, adding value through active management and operational improvements.
“Ultimately, listed infrastructure provides transparency, flexibility, and repeatability – especially valuable when managing portfolio-wide risk,” said Robertson.
Costello noted that Magellan’s core infrastructure strategy, launched in 2009, has outperformed the MSCI World Index over much of its life – and despite setbacks from rising rates in 2022–23, is “nipping at its heels”.
“We think that’s compelling evidence of real structural growth,” he said.
In an environment where investors are rethinking traditional 60/40 allocations, global listed infrastructure offers something rare: real-world reliability, growing demand, and a path to long-term outperformance.
As Robertson concluded: “This is more than just a defensive play. It’s an opportunity to access essential infrastructure at compelling valuations – positioning portfolios for both resilience and upside in an uncertain world.”
