Mega forces such as the low‑carbon transition, artificial intelligence and geopolitical fragmentation are driving sustained, multi‑decade demand for infrastructure, according to the latest paper from the BlackRock Investment Institute (BII).

Entitled The infrastructure opportunity in portfolios, the paper explores why the BII see infrastructure as a timely investment and an increasingly core allocation in diversified portfolios.

Yet, at the same time, “listed infrastructure valuations are trading well below long-term averages despite strong fundamentals, creating a compelling entry point”.

Infrastructure assets, which include transport, energy, digital and utility systems, typically generate long-duration cash flows that are often inflation-linked and supported by regulation or long‑term contracts, said the BII.

“These characteristics give infrastructure a defensive profile, while structural forces such as AI and the low-carbon transition add earnings growth potential.”

Against this backdrop, BII’s analysis suggests that increasing infrastructure exposure could improve long-term portfolio outcomes, particularly as many portfolios remain under‑allocated today.

The BII found that portfolios typically hold only around 4–5% of implicit infrastructure exposure today. Depending on risk and liquidity preferences, total exposure could rise to 10-19%, potentially enhancing portfolio efficiency and diversification.

Itsanalysis shows that increasing infrastructure exposure — across listed and private markets in particular — could deliver attractive risk‑adjusted returns relative to traditional equities and bonds over a 20-year horizon.