Infrastructure stocks can sometimes play a background role during markets where the focus is on flashy, high-growth tech stocks.
But investing in infrastructure has several advantages, and now could be an excellent time for investors to consider upping their exposure. Governments in the UK and elsewhere are boosting their spend on infrastructure, at the same time as the sector receives significant tailwinds from the artificial intelligence (AI) boom.
While they seldom make it into the top stocks, funds and trusts lists, infrastructure investments can play a valuable role in portfolios.
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Infrastructure offers “a source of growing income, a source of inflation protection, and a way to access particular themes where large amounts of investment are being capitalised,” says Mark Brennan, portfolio manager of the Guinness Global Real Assets Fund.
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Many infrastructure funds have a focus on long-term sustainable goals such as renewable energy, so benefit from governmental drives towards these goals.
But unlike high-tech growth stocks, which are risky and highly susceptible to macroeconomic shifts, infrastructure stocks can offer defensive qualities and a degree of protection against inflation.
Macro tailwinds for infrastructure investments include a drive for greater infrastructure spending across the UK and Europe.
Germany’s parliament has unlocked a €500 billion infrastructure fund earlier this year, and in January, and in June ministers in the UK set out plans to spend £725 billion on infrastructure over the next ten years.
What are the advantages of investing in infrastructure stocks?
While there is variation across the various sub-sectors of infrastructure, in general infrastructure stocks share certain qualities for investors.
“Infrastructure is an investment category which is frequently perceived by investors as a diversifying asset from other asset classes,” writes Sergiy Lesyk, director, research and analytics at London Stock Exchange Group. “It has been known to provide a hedge to long-term liabilities by offering exposure to stable returns and a steady income.”
Infrastructure companies tend to have long-running contracts and as such generate steady, predictable revenue streams.
They are also, on the whole, resilient to inflation. Regulated infrastructure businesses like utilities, for example, often have periodic price increases written into their contracts, and these are often linked to inflation.
“In unregulated business models, it would be typical to see some kind of annual escalator,” explains Brennan, “such as a semi-annual or five-yearly contractual escalator built into the lease structure in order to try to keep pace with inflationary pressures.”
Why is now a good time to invest in infrastructure?
2025 has been a turbulent year for equity markets, and infrastructure investments tend to outperform during market drawdowns such as those seen during the tariff turmoil back in April.
“Over the last couple of years we’ve been coming out of a little bit of a bear market, driven largely by interest rates,” says Brennan. Infrastructure stocks can be sensitive to interest rates because they are often debt-funded.
But with interest rates falling globally despite sticky inflation in some areas, 2025 is “marking a little bit of a turning point for the sector broadly”, says Brennan.
Additionally, some infrastructure industries are seeing unusual levels of earnings growth thanks to thematic developments, particularly the growth in AI.
“Particularly for businesses that are exposed to growth in energy demand,” says Brennan, “particularly electricity, and particularly driven by data centres in more developed markets.”
One example is Enbridge (NYSE:ENB). Enbridge has a growing renewable energy business, and in July announced that it is building a 600 megawatt solar facility in Texas, with Meta (NASDAQ:META) taking 100% of the energy output to power its technology and data centre operations.
Infrastructure plays like these can be one of the better-value plays on the AI theme.
How to invest in infrastructure
The challenge of investing in infrastructure for most investors is that “by their nature, these are very illiquid assets”, says Ben Seager-Scott, chief investment officer at Forvis Mazars. “Selling something like a port or a pipe network is a slow and expensive process – meaning true infrastructure investment is best done on a very strategic basis.”
As such, one of the most popular means for individual investors to access the sector is via infrastructure investment trusts. These, says Seager-Scott, “are closed pools of capital that trade on the stock exchange so can provide an apparent level of limited liquidity on a daily basis”, though he cautions that “they are still subject to the usual volatility of listed instruments and the underlying investments remain highly illiquid”.
Infrastructure investment trusts currently trade at a 16.7% average discount and yield over 6.1% according to data from the Association of Investment Companies (AIC). Renewable energy infrastructure trusts, meanwhile, have a 27.8% average discount and a 9.7% average yield.
“Underlying asset values remain solid, but sentiment hasn’t caught up, and boards are now looking to manually close the gap [by] selling assets, reducing debt, and initiating share buybacks to unlock shareholder value,” says Darius McDermott, managing director at Chelsea Financial Services.
There are also infrastructure funds such as Brennan’s Guinness Global Real Assets. The fund was launched in July, and aims to capture the hallmarks of infrastructure investments via 35 equal-weighted stocks across the range of infrastructure investments, including companies that are set to benefit from increased spend on data centres (including Enbridge).
Guinness Global Real Assets allocates around 35% of its portfolio to investment trusts that focus on infrastructure.
