BlackRock: Infrastructure secondaries predicted to soar by 2027
Infrastructure secondaries are the fastest growing segment within infrastructure, with annual volumes expected to soar beyond $25bn (£18.7bn) by 2027, according to a report by BlackRock Infrastructure Solutions (BIS).
According to the BIS report, infrastructure primary funds have amassed more than $1tn in the last decade. By 2026, infrastructure assets under management (AUM) are forecasted to reach nearly $2tn.
Infrastructure secondaries are attractive to investors in terms of inflation hedging, downside-protection, resilient and recurring cash flows, and yield generation – which can be immediate due to the more mature portfolios.
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“Secondaries offer a strategic avenue to mitigate the J-curve’s initial drag,” the report notes. “By acquiring stakes in established funds and assets, investors enter at a more mature phase of the investment lifecycle, while also potentially saving on fees and expenses charged in the early stages of a fund’s life.”
At present, infrastructure secondary volumes only account for between 1 and 2 per cent of infrastructure AUM, which BIS says is like that of private equity in the early 2000s and to real estate in 2015-17.
“Today, private equity secondaries volumes account for ~5 per cent of private equity AUM, and real estate secondary volumes account for ~3 per cent of AUM,” the report adds.
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“Secondaries are taking off rapidly, with penetration rates just beginning to catch up to the levels seen in private equity in the early 2000s and transaction volumes expected to ascend to new heights in the coming years,” said Serge Lauper, global head and chief investment officer, infrastructure solutions. “We see this as a great opportunity for infrastructure investors to broaden their exposure and find an attractive entry point within the asset class.”
Infrastructure Solutions head of secondaries and co-head of EMEA Jérôme Leyvigne said: “Infrastructure primaries of today are the secondaries of tomorrow. Infrastructure secondary volumes currently only account for 1-2 per cent of infrastructure AUM. This undercapitalisation has created buyer-friendly dynamics, particularly for mid-size transactions which often fly under the radar. As these conditions persist, we anticipate secondary buyers will continue to be presented with attractive investments at compelling prices.”
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