The Advantages of Investing in Infrastructure and Other Real Assets 

Summary

The demand for infrastructure investment is surging, driven by decades of underinvestment, evolving demographics, and the transformative secular forces of digitalization, deglobalization, and decarbonization. This rising need coincides with a pullback from traditional financing sources, creating a multi-trillion-dollar funding gap. Private capital is increasingly stepping in to address this shortfall, presenting a compelling opportunity for investors seeking stable, long-term returns.

This report explores the dynamic landscape of infrastructure investing, highlighting the diverse opportunities across sectors and the risk-return spectrum. From essential services like transportation, digital infrastructure, and the energy complex powering our modern world, we examine the potential benefits of investing in infrastructure assets, including steady cash flow, inflation protection, portfolio diversification, and resiliency through economic cycles. We also delve into the strategic advantages of focusing on the middle market, where a less competitive environment can yield attractive valuations and stronger covenant protections.

Report Highlights

• Infrastructure investment needs are surging due to decades of underinvestment, demographic shifts, and the secular megatrends of digitalization, deglobalization, and decarbonization. Meanwhile, traditional financing sources have scaled back, leaving a multi-trillion-dollar funding gap that private capital is increasingly filling.
• Because many infrastructure assets provide essential services, demand for which often does not vary with the economy or interest rates, they can offer a compelling combination of steady cash flow, portfolio diversification, and a hedge against both inflation and recession. They range from stable, low risk core assets to high risk, high return opportunistic investments, catering to different investor objectives.
• We believe there is better relative value in the middle market, ranging from $50 million to $500 million, which offers a more plentiful, diverse investment landscape with fewer bidders than in the large-cap market.
• The size and complexity of the infrastructure investment landscape present a challenge. Successful infrastructure investing requires entrenched long-term relationships with borrowers, sponsors and banks, sector expertise, as well as dedicated underwriting and origination teams with experience across private and public debt and equity.
• Guggenheim’s approach to investing in hard assets—or tangible, physical investments—leverages our scale and deep underwriting expertise across dedicated infrastructure, real estate, and structured product franchises. Extensive industry relationships provide differentiated investment opportunities, providing us with increased opportunities to unlock value with a focus on risk-adjusted returns.

Infrastructure Investing: Driving and Driven by Dynamic Global Change

The need for investment in infrastructure is set to surge in the coming years, driven by decades of underinvestment, socio-demographic shifts, and the massive secular forces of digitalization, deglobalization, decarbonization. These multi-decade trends will drive demand spanning a diverse range of real assets necessary to move people, goods, energy and resources, and digital information.

Lifestyles have evolved, and infrastructure is evolving with it. Today, we work from smart homes, drive electric vehicles, and make online purchases delivered to our door. Many have moved away from the cities and denser suburbs, in favor of less populated areas. Our lives today require more complex digital, logistical, and transportation infrastructure, fueled increasingly by renewable energy. Meanwhile, deglobalization is reordering global supply chains, further boosting the need for domestic infrastructure. These trends will, in our view, fuel investment opportunities across the risk-return spectrum.

Digitalization requires the storage and movement of digital information, driving demand for data centers, fiber networks, and 5G infrastructure. The explosive growth of generative AI, cloud computing, Internet of Things (IoT), and bandwidth-intensive applications makes digital infrastructure essential for ensuring fast, secure, and reliable data transmission to power the global economy. Infrastructure investments that will help advance global digitalization include:

• Data centers
• Fiber & broadband networks
• 5G Infrastructure
• Small cell, low power base stations
• Telecom towers

Decarbonization. The clean energy transition is powering ahead despite Congress’ passage of the “One Big Beautiful Bill” in July 2025, which rolled back many of the tax credits and funding mechanisms established under the Inflation Reduction Act (IRA). Incentives for wind, solar, and electric vehicles are being cut, but support for nuclear, geothermal, carbon capture, and battery storage remains largely intact.

Even so, solar and wind remain competitive. Costs keep falling. Market demand is strong. Battery storage is rapidly becoming more cost-effective, easing integration of renewables.

The bigger picture? The need for new energy infrastructure is immense, and the rise of AI is making it even more pressing. Power generation, transmission lines, storage solutions—every link in the chain requires investment. Federal cutbacks may slow some areas but create openings elsewhere. Public-private partnerships in nuclear and geothermal look promising, while states are increasingly taking the lead: New Jersey and Illinois are driving adoption with incentives and equity-focused legislation; Texas through deregulated markets that speed deployment even without federal backing. Financing the future of energy also means investing in grid innovations, scaling carbon capture, and building the skilled workforce needed to build and maintain the next-generation energy system.

Core Clean Energy Transition Investments include:

• Energy (nuclear, geothermal, solar, wind, hydro, etc.)
• Grid Modernization (transmission, distribution, smart grids)
• Energy Storage (batteries, pumped hydro, etc.)
• Electric Vehicle Infrastructure (charging stations, grid updates

The move to accelerate decarbonization will also take the form of a number of peripheral infrastructure investments, including:

• Specialty Equipment Leasing for power projects
• Labor Agencies focused on energy transition sectors
• Peaking Generation Facilities for grid stabilization
• Low Carbon Offshore Oil/Gas Infrastructure

Deglobalization. Reshoring and nearshoring are gaining momentum as geopolitical tensions and protectionist policies slow global trade. These shifts are reshaping the flow of goods and fueling demand for U.S. investment in logistics, transportation, energy, and commercial real estate. According to the Counselors of Real Estate, the nation’s core logistics region—often referred to as the “Golden Triangle,” stretching from the Great Lakes down to Texas and across to the Mid-Atlantic—accounts for more than half of U.S. GDP and is positioned for even greater development demand¹. This demand will take the form of numerous new plants and other hard assets that will call for modern infrastructure and commercial real estate to support evolving supply chains.

• Logistics
• Transportation
• Energy
• Commercial real estate
• Aviation

Socio-Demographic Shifts. Migration from urban to suburban and rural areas, the aging of the population, and the trend toward more single-person households are reshaping where and how people live, work, and consume goods and services, creating infrastructure needs in a broader geographic region across residential, commercial, and logistics sectors. These trends are bolstering demand for modern assets, including those that are well-connected and equipped with the latest technologies, driving further investment opportunities in these non-urban areas.

• Residential real estate
• Commercial real estate
• Supply chain logistics

Private Capital Steps In to Fill Growing Funding Gap

The scale of U.S. infrastructure investment required far exceeds what current capital flows can meet, leaving an onerous funding gap. The American Society of Civil Engineers estimates that the investment gap needed to address aging infrastructure total $3.7 trillion this from 2024 through 2-33², across  all of its 19 infrastructures--and while federal, state, and local governments typically own roads, water systems, aviation networks, and other societal assets, over 80 percent of non-defense infrastructure is privately owned³

Historically, private sector infrastructure was financed by banks and public debt, along with private and public equity. However, banking regulations implemented after the great financial crisis made infrastructure lending less profitable, prompting banks to scale back.

Private capital, attracted by compelling returns, has been increasingly stepping in to fill the gap, now providing almost half of all infrastructure debt and equity financing.⁴ In the U.S., more than $2.5 trillion poured into the asset class from 2018 through 2022, leading to far larger infrastructure investment funds. The average fund is now more than $4 billion, with more than half exceeding $11 billion.⁵ In 2023, funds with more than $1 billion in assets under management (AUM) accounted for 83 percent of all real asset strategy fundraising.

Half of the capital raised by these large funds from 2018 through 2022 has yet to be invested. Sitting on this mountain of dry powder, big funds are increasingly vying for the  same large infrastructure projects, which may have the effect of driving up valuations. In contrast, smaller funds (under $1 billion in AUM) have just 30 percent of their 2018-2022 vintages uninvested. These smaller funds typically target projects valued from $50 to $500 million, known as the “middle market,” which potentially offers a larger, more diverse landscape, broader exit opportunities, and fewer bidders. Mid-size companies are often overlooked by bigger funds, reducing competition in this market segment.

1. Counselors of Real Estate (CRE), “2023–2024 Top Ten Issues Affecting Real Estate. 2. ASCE estimates that the gap will be $3.7 trillion between 2024 and 2033 if Congress continues recent funding levels. However, that gap would increase substantially if Congress reverts to funding levels in place prior to increases from legislation passed during the Biden administration through the Infrastructure Investment and Jobs Act (IIJA) and Inflation Reduction Act (IRA) 3. CATO Institute, American Society of Civil Engineers. 4. As of 3.31.2025. 5. Pitchbook.

Why Invest in Infrastructure?

Infrastructure investments, typically considered alongside private credit, private equity, and real estate, offer a combination of benefits that distinguish them as a compelling asset class.

Many infrastructure assets provide essential services, the demand for which tends to remain stable regardless of economic conditions or interest rate fluctuations. This characteristic allows infrastructure to potentially offer steady cash flow, resiliency through market cycles, and valuable portfolio diversification. Additionally, infrastructure often provides services through long-term private or government contracts with price escalators tied to inflation, further strengthening its role as an inflation hedge. Private infrastructure also exhibits a significantly lower correlation to public equity than bonds, providing a more effective recession hedge. This resilience is largely due to the asset class’s demand inelasticity and inflation hedging characteristics.

The large projected infrastructure gap and soaring demand for new data centers will, in our view, create significant investment opportunities over the next decade.