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    Pathways

    Infrastructure secondaries

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    Infrastructure secondaries: A new way to access infrastructure assets

    Mitigation of the J-curve effect

    Secondaries investors often gain access to already operating assets, which offers an opportunity to mitigate the J-curve effect partially or fully.

    Enhanced diversification

    Secondary funds offer an opportunity to create a highly diversified portfolio by manager, vintage, geography, and strategy.

    Reduced blind pool risk

    Secondaries investors tend to know which assets they are acquiring, which may enhance visibility and reduce the blind pool risk.

    Potential growth

    Infrastructure secondaries’ assets under management could reach between $US50 billion and $US67 billion in 2025, up from $US18.6 billion1 in 2021.

    Liquidity provision

    As the secondary market expands, it often acts as a liquidity provider to limited partners and gives greater flexibility to general partners.

    1Based on Preqin database, data as of September 2021.

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    This market commentary has been prepared for general informational purposes by the respective authors, who are part of Macquarie Asset Management (MAM),  the asset management business of Macquarie Group (Macquarie), and is not a product of the Macquarie Research Department. This market commentary reflects the views of the respective authors and statements in it may differ from the views of others in MAM or of other Macquarie divisions or groups, including Macquarie Research. This market commentary has not been prepared to comply with requirements designed to promote the independence of investment research and is accordingly not subject to any prohibition on dealing ahead of the dissemination of investment research.

    A J Curve represents the tendency of private equity funds to post negative returns in the initial years and then post increasing returns in later years when the investments mature. The negative returns at the onset of investments may result from investment costs, management fees, an investment portfolio that is yet to mature, and underperforming portfolios that are written off in their early days. 

    A blind pool, also known as "blank check underwriting" or a "blank check offering," is a direct participation program or limited partnership that lacks a stated investment goal for the funds that are raised from investors.

    Investment strategies that hold securities issued by companies principally engaged in the infrastructure industry have greater exposure to the potential adverse economic, regulatory, political, and other changes affecting such entities. Infrastructure companies are subject risks including increased costs associated with capital construction programs and environmental regulations, surplus capacity, increased competition, availability of fuel at reasonable prices, energy conservation policies, difficulty in raising capital, and increased susceptibility to terrorist acts or political actions.

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