The liquid complement

For investors looking for dependable real growth, infrastructure is an important component of any portfolio. Owning assets whose cash flows are underwritten by regulation, long-term contracts and indispensable demand produces predictable, inflation-linked earnings that have historically stood up through recessions and shocks and provided the foundations for real growth over time. We view this as infrastructure’s core purpose in investor portfolios – to enhance risk-adjusted returns by providing diversification and preserving capital in challenging market conditions while delivering real growth over time. Furthermore, investing in infrastructure through listed vehicles provides a nimble and liquid means to access this asset class.

When investors consider infrastructure, this is often synonymous with private, or unlisted, investments in infrastructure assets. Indeed, market data suggest that private infrastructure has become one of the fastest-growing asset classes among institutional investors, with assets under management rising by more than 15% per year.¹ Dry powder, or undeployed capital, or infrastructure strategies was estimated at US$333.9 billion at the start of 2025 , which is more than double that of US$150.1 billion in early 2015.

 In our view, investing in listed or unlisted infrastructure is not a “one or the other” investment decision. Listed and unlisted infrastructure assets exhibit different characteristics that enhance the expected risk-adjusted return of a portfolio. These differences are apparent across quality, diversification, volatility and liquidity of listed and unlisted assets. At the same time, historical returns for listed infrastructure have been at least comparable to those for unlisted infrastructure assets, suggesting that investors don’t give up any return to achieve these differentiated characteristics.

To make these complementary roles clear, in the following sections, we look at the three inherent benefits investors see in unlisted infrastructure and examine these from the perspective of global listed infrastructure:

• Predictable cash flows

• Diversification

• Mitigation of volatility

We also look at liquidity. Liquidity is a fundamental difference between listed and unlisted approaches and supports their complementary properties in a portfolio.

Predictable cash flows

Investment allocations to infrastructure through unlisted infrastructure funds or private market transactions are aimed at securing steady, inflation-linked returns over the long term. Fuelling this demand is the expectation that some high-quality infrastructure projects can best be accessed via private markets (for example, airports or unlisted water or electricity utilities), which will then provide superior, predictable returns.

However, access to resilient returns is equally achievable through investment in listed infrastructure. This is because the sector and business model fundamentals that underpin the earnings profile for unlisted companies also hold true for listed assets. For example, a regulated utility, either listed or unlisted, is governed by an economic regulatory framework that provides for an agreed rate of return, allowable capital expenditure and limited competition. These drivers are instrumental in achieving stable, long-term, inflation-linked returns.

Listed infrastructure offers a unique proposition compared to unlisted investments, as it provides access to a large, transparent opportunity set. Listed infrastructure companies hold many high-quality assets that are not available in unlisted markets. For example, global toll road operators Transurban and Ferrovial, Spain’s airport system operator Aena and Italy’s largest gas company Italgas are listed infrastructure companies. Investors in these companies have been well-rewarded, as they have achieved rising returns on equity and higher earnings per share over time. As a case in point, Figure 1 below shows traffic, revenue and earnings growth for Ferrovial’s 407 ETR toll road, located in Ontario, Canada. This shows sustained, reliable growth in demand, supporting ongoing robust growth in revenue and earnings. Furthermore, US regulated utilities such as WEC Energy are an example of a sub-sector where listed markets are the predominant way to invest. These utilities offer predictable cash flows and reliable earnings growth², reflecting regulated returns, and are largely available only as listed assets.

Figure 1: Listed infrastructure assets provide predictable earnings growth, backed by dependable demand

Source: Ferrovial, Magellan analysis of company disclosures.
 

Listed infrastructure companies are also distinct in the scale of their portfolios. This breadth provides for diversification in earnings and the opportunity to achieve greater operational efficiencies, which support reliable earnings growth. Communications infrastructure is one such example, with listed company American Tower owning nearly 150,000 communications sites, including 42,000 tower sites in the US. Network infrastructure such as US freight rail is another example where a listed company like CSX has a large-scale portfolio that is difficult to replicate through private market investment in rail assets.

The data also suggest that on a relative basis, listed infrastructure is at least as good as its unlisted peers on financial performance. For example, a proxy can be seen in Figure 2, which shows that for a sample of European airports, listed airports typically performed in the top half of the group for total revenue per passenger.

Figure 2: Financial performance for European airports shows listed companies perform at least as well as their unlisted peers

Source: Magellan analysis, Irish Aviation Authority
 

Diversification

The appeal of unlisted infrastructure also reflects the expectation that unlisted assets provide greater diversification to an investor’s portfolio.

Unlisted infrastructure is seen to offer lower correlation with listed markets and other asset classes. As a result, a portfolio with this unlisted exposure is seen to provide an improved risk/return profile, supporting net returns that are more stable when these assets are included. We can observe that unlisted infrastructure has notably smooth returns, which promotes lower measured correlation to listed infrastructure and the equity market. This is shown in annual returns over the last ten years (in Figure 3 below).

Importantly, this is very much an artefact of the valuation methodology for unlisted assets, rather than a fundamental difference in the assets themselves³. The chart highlights a key characteristic of unlisted funds, which is the infrequent, appraisal-based valuation methodology used for returns. These are often computed with a sizeable lag of several months, which smooths out valuation and has a significant impact on returns and correlations. The 2022-2025 period is an important example, as while listed infrastructure recorded a string of negative returns, which reflected real-time market pricing in response to rate hikes, unlisted infrastructure continued to post positive returns. Only in late 2024/early 2025 have private market returns turned down while listed returns have risen. Figure 3 below illustrates this lag.

Figure 3 Yearly returns for private market infrastructure are noticeably smoothed

Source: GLIO, Bloomberg, Magellan, Magellan analysis. MFG Core Infrastructure data is net of fees and hedged in AUD. Calculations are based on exit price with distributions reinvested, after ongoing fees and expenses but excluding individual tax, member fees and entry fees (if applicable).Global equities refers to the MSCI World TR index, net of fees and hedged in AUD. Private markets infrastructure refers to the midpoint series aggregate per GLIO.
 

For investors considering the complementary roles of listed and unlisted infrastructure in a portfolio, it is important to be aware of the implications of this smoothing approach undertaken for unlisted infrastructure assets. While unlisted asset portfolios can smooth out returns in choppy market periods, this deferred approach presents a valuation risk at a later time, when the portfolio looks to exit. As an example, we observe that the more stable reported returns for unlisted assets over 2022 to 2023 could reflect valuers ‘looking through’ the elevated interest rates of that time to a lower, more normal long-term discount rate. Crucially, that subsequent unlisted returns have deteriorated from late 2024/early 2025 might suggest that the persistence of higher rates has now prompted valuers to incorporate higher rates in their models. This use of higher rates presents a risk, as the use of lower rates in 2022-2023 would mean valuations in this period were overstated. For unlisted strategies looking to exit these assets in the future, these higher rates could be expected to weigh on their achieved returns at exit, which is the ultimate measure of returns.

Country and sector diversification are other key elements to overall diversification in a portfolio. On this point, listed infrastructure typically offers more diverse allocation of capital. Through investment in listed infrastructure, investors have access to a more diverse range of geographies and markets than they would in a typical unlisted infrastructure fund. For example, access to global infrastructure companies like Ferrovial (NL) and Vinci (FR), toll roads including Transurban (AU), and high-quality water utilities including Severn Trent (UK) are possible in the listed market. This broader opportunity set enables investors to gain access to high-quality projects with exposures to multiple economies, supporting the build-up of a well-diversified infrastructure portfolio. Figure 4 below shows the diverse geographic and sector split of the MFG Core Infrastructure Strategy as an example.

Figure 4: The MFG Core Infrastructure Strategy has diverse geographic and sector exposures

As at 30 September 2025
 

Once again, the valuation methodology used is an important difference between listed and unlisted investments. As described in the section above, unlisted infrastructure investments typically apply an appraisal-based valuation methodology that is infrequent. This approach gives valuers the ability to look through ‘transitory’ moves in interest rates and business performance, which could mean that, in a valuation round, a materially lower interest rate is used than market rates. This has a smoothing effect on volatility and therefore returns appear less volatile than listed investments, which use high-frequency, market-observable data for their own calculations. We note that listed infrastructure companies could be expected to exhibit similarly low volatility if the same ‘look through’ rates were applied.

These observations have several investment implications. First, for investors looking to lower volatility in their portfolio, infrastructure as an asset class – regardless of whether it is listed or unlisted – exhibits lower volatility than the equity market. This is shown in Figure 5 below. This makes sense, as the underlying assets for listed and unlisted vehicles are inherently similar and provide stable returns. The steady demand and predictable earnings underpinning these businesses support stable intrinsic valuations over time. Our observation is that the difference in the standard deviation for listed/unlisted infrastructure is a function of the valuation approach used in private markets, rather than an underlying differential in performance.

Figure 5 Infrastructure – listed and unlisted – is a less volatile asset class than equities

Source: Bloomberg, GLIO, Magellan. Analysis of trailing one-year returns for monthly index data 2015-2025. MFG Core Infrastructure data is net of fees and hedged in AUD. Global equities refers to the MSCI World TR index, net of fees and hedged in AUD. Private markets infrastructure refers to the midpoint series aggregate per GLIO.
 

Second, real-time pricing for listed infrastructure can present an opportunity for investors. Market pricing means investors can take advantage of market mispricing where a company is intrinsically undervalued and shift their portfolio positioning accordingly. This is a distinctly different approach to private infrastructure, where an investor can buy only what is on the market at the time. For example, consider 2022, when the market reacted to steep interest rate hikes. In the period January 2022 to the end of September 2022, the S&P Global Infrastructure Index was down -12.6%, with average monthly returns of -1.3%. Listed infrastructure stocks also slumped in response to the sharp uptick in rates. With many stocks in the listed infrastructure universe trading below their intrinsic valuations, this was a buying opportunity for investors, with listed infrastructure subsequently recovering. By contrast, private markets infrastructure showed still-solid deal activity from Q4 2021 to Q4 2022 (at an average of 676 deals per quarter, and a US$112 billion average aggregate deal value⁶). However, there was then a noticeable, lagged decline in activity in 2023 (average of 550 deals per quarter, and US$83 billion average aggregate deal value6), with deal activity remaining at these levels in 2024. We note that this decline in deal flow could reflect in part the desire of unlisted funds to avoid realising a price less than what they valued the asset at. This activity is in contrast to listed infrastructure, where investors receive, rather than determine, the market price and therefore can take advantage of market dislocations.

Perceived diversification and volatility benefits affect valuations

The diversification and volatility benefits assigned to private markets infrastructure drive some potentially significant impacts on valuation. That is, investors can pay an observable premium for unlisted infrastructure assets that can ultimately weigh on achieved returns. For investors looking at both listed and unlisted approaches, this is also important to be aware of.

The data suggest investors have historically valued private infrastructure at higher multiples than listed infrastructure. For example, if we look at European airports (Figure 6 below), we can see that unlisted airports, on an EV/EBITDA basis, have received valuations that have averaged around 20x over the last two decades. This compares to around 10x for listed airports. The size of the premium likely reflects the perceived benefits of lower correlations and lower volatility afforded by private market investment options. However, as we have discussed, these benefits are a function of the valuation methodology used, which smooths results for unlisted assets. At the same time, investors have historically been willing to pay a control premium for private infrastructure assets, which reinforces this premium. The rationale is that, out of the public gaze and as a major shareholder, an investor can influence the management of the asset and its performance. However, there is no evidence that unlisted assets have stronger operational performance than listed assets, and gearing has been a notable factor in short-term performance for some unlisted assets (for example, the UK water sector).

Figure 6: Public markets can provide access to comparably high-quality assets at a discount to private markets, as this European airports case study suggests

Source: Company accounts, Magellan analysis
 

Liquidity

Finally, the one inherent difference between a private infrastructure asset and a listed asset is liquidity. By their very nature, unlisted vehicles are less liquid than those on public markets. Raising capital is not a quick process, and once money is in an unlisted fund, it can take time to extract it. Equally, it takes time to invest capital in unlisted infrastructure assets. The level of dry powder, or undeployed capital, held in private infrastructure funds, currently at $335 billion⁷ is an important data point, suggesting that deploying capital can also be a lengthy process. This is not necessarily an issue for investors with a long investment time horizon. However, this time lag does weigh on the investor’s realised return if they cannot identify investments with consistently higher returns than those available in listed markets. Furthermore, the volume of uninvested funds and the need to deploy capital present the risks of overpaying for assets, given heightened competition or purchasing lower-quality assets. The closed-end nature of private infrastructure funds can also mean redeeming assets when market conditions are sub-optimal. The valuation on exit is the ultimate proof of performance, as noted, and this can be hard to optimise for an unlisted asset.

Listed infrastructure, on the other hand, is liquid. It is easy to deploy capital into liquid vehicles quickly, and investments are open-ended. Having sufficient liquidity is not only important in times of market stress, but also for regular portfolio management purposes, including rebalancing. Owning a liquid form of the asset class allows the investor to trim or change positions, reflecting changing valuation multiples or outlook on sub-sector or market exposures. We have noted that listed infrastructure also serves as a liquid completion sleeve for less-liquid allocations.

Performance figures suggest comparable outcomes for listed and unlisted approaches

The proof of the benefits of investment in listed or unlisted infrastructure is in performance. While there are some near-term differences, reflecting the valuation and construction issues discussed above, over an investment cycle listed and unlisted infrastructure show solid real returns. This is illustrated in Figure 7 below, looking at total returns for listed and unlisted infrastructure, and also equities. For the period December 2009 to June 2025⁸, the MFG Core Infrastructure returned 10.7% per annum⁹, while private markets infrastructure returned 9.2%. The data show that listed infrastructure achieved a return premium to unlisted infrastructure over this period. We note that this has been a strong period for infrastructure investments, and in the future investors could expect a more moderate rate of return, given the highly defensive nature of this strategy. Returns of CPI plus 5% are considered reasonable for the MFG Core Infrastructure over the investment cycle.

Figure 7: Listed and unlisted infrastructure have recorded comparable returns over time

Source: GLIO, Bloomberg, Magellan analysis. Global equities refers to the MSCI World, TR index, hedged in AUD. Listed infrastructure refers to the MFG Core Infrastructure Strategy, net of fees and hedged in AUD. Private markets infrastructure refers to the midpoint series aggregate per GLIO, which is net of fees.
 

Listed and unlisted infrastructure exposures are complementary

Reflecting the differing characteristics across diversification, volatility and liquidity for listed and unlisted infrastructure investments, along with comparable returns over time, investors could likely benefit from a combination of listed and listed infrastructure in their portfolio. Investors can strategically combine listed and unlisted assets in a way that best works with their risk/return profile. For example, if an existing portfolio contains only private infrastructure, the addition of listed infrastructure could support performance through greater diversification and liquidity to better take advantage of market dislocations.

Ultimately, we see that adding or increasing the exposure of a multi-asset portfolio to infrastructure can support returns while enhancing its risk/return profile.

Magellan Infrastructure Team

 

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¹ Preqin, July 2025. Data for the decade 2013-2023
² Refer to the Magellan report, Powering through uncertainty, June 2025. Our analysis shows ROE for these high-quality listed regulated utilities at 10-12% over time (2005-2025).
³ Looking at rolling, annual returns over a ten-year window from 2015 to 2024, our analysis suggests a consistent, positive correlation of around 0.35-0.55 between listed and unlisted infrastructure returns. This holds except for the three years from 2022 to 2025, where interest rate increases drove several consecutive months of negative performance for listed infrastructure.
⁴ GLIO, Infralogic
⁵ Refer to the Edison Electric Institute
⁶ Preqin
⁷ Preqin, as at end of the March quarter 2025
⁸ Period selected to cover performance since the inception of the MFG Core Infrastructure
⁹ Net return, hedged and in AUD