Quarterly Portfolio Manager Insights: Q1 2025

February 28, 2025

Opportunities for Infrastructure Debt Investing in 2025

Growing Opportunity for Infrastructure Debt Investment

As economies evolve and industries transition toward more digital and sustainable solutions, the need for infrastructure investment is more critical than ever. Infrastructure is crucial for modern society and technological development, including expanding power grids and increasing data center compute capacity. Private investment provides an essential tool to support these critical infrastructure projects.

The Digital Infrastructure Boom

What is driving increased infrastructure investment? The explosion of digital infrastructure due to the rise of AI, cloud computing, 5G networks, and “smart” internet connected devices (everything from household appliances to heavy machinery – aka “the internet of things” or “IoT”) requires unprecedented investment in data centers, fiber-optic networks, and energy systems.

Digital Infrastructure Boom The scale of this transformation is remarkable. Large tech firms—often called “hyperscalers” for their ability to rapidly scale their digital infrastructure—invest hundreds of billions of dollars to build next-generation data centers and the supporting infrastructure. Hundreds of data centers, which demand significant amounts of electricity, are being built across the US and globally. For example, a single one-gigawatt data center can consume as much power as 1.3 million homes or approximately half the power produced by the Hoover Dam¹. This places significant pressure on power grids, which will likely lead to these data centers seeking behind-the-meter solutions where they have on-site generation rather than relying on the public grid. This presents further investment opportunities in distributed energy, renewable energy, and battery storage.

For a deeper look at how the rapid expansion of data centers drives power demand in the US, explore this recent analysis from Reuters.

Bridging the Infrastructure Funding Gap

Infrastructure Funding Gap The demand for infrastructure investment far exceeds available capital, and the expectation of increasing long-term demand for power due to data center growth and increased electrification is just one example as to why. Estimates suggest the world needs $200 trillion in infrastructure investment over the next 30 years, yet private infrastructure debt funds have raised just $200 billion² in the last decade. This presents an opportunity for private investments to bridge the gap and help finance these critical infrastructure projects, particularly transportation, renewable energy, and utilities. More public-private partnerships (PPPs) will help ensure that essential infrastructure projects receive the needed private funding.

For a deeper look at how private credit is growing in addressing the infrastructure funding gap, explore this recent report from S&P Global.

Infrastructure Debt in a Changing Economy

Infrastructure debt continues to stand out as an attractive investment option, particularly compared to mainstream investments like public equities which historically have had significantly higher volatility. Infrastructure assets provide essential services to people and businesses, and demand for their services tend to remain steady even in recessionary environments. Additionally, infrastructure debt provides the following benefits:

Diversification: Infrastructure debt has historically had low correlations to public equity and debt markets.
Inflation Protection: Many infrastructure loans are floating rate, which tend to provide higher yields in inflationary environments since inflation typically leads to rising interest rates.

Looking Ahead: The Future of Infrastructure Investing

As we move deeper into 2025, we believe several significant themes will shape the infrastructure debt market:

Electrification and Energy Transition: Data centers, increased use of electric vehicles (EVs), and industrial electrification are expected to drive up power consumption. To keep up, investments in expanding the power grid and energy storage solutions will be essential.
Building Resilient and Sustainable Infrastructure: Evolving regulations require more adaptive and sustainable infrastructure, meaning a greater focus on renewable energy, efficient water management, and modernized transportation infrastructure is needed to support long-term environmental and economic resilience.
Expanding the Role of Private Capital in Infrastructure: As governments face more budget constraints, institutional and private capital will continue to play a significant, and potentially growing, role in funding infrastructure projects.

For more information, the International Energy Agency (IEA) provides an in-depth analysis of global energy needs.

Final Thoughts

Infrastructure debt presents a compelling opportunity for investors looking to generate consistent income while historically hedging against market volatility. As the demand for digital, renewable, and core infrastructure grows, we believe this asset class is well suited to be a cornerstone of investment portfolios.

At Harrison Street Private Wealth, we remain committed to identifying and investing in high-quality, essential infrastructure assets we believe should deliver attractive risk-adjusted returns—in both stable and uncertain economic environments. Our expertise in the infrastructure debt market, coupled with our rigorous investment process, positions us as a trusted partner for investors seeking to capitalize on the opportunities in this sector.

We invite you to schedule a call to learn more about the Harrison Street Private Wealth Infrastructure Income Fund (VCRDX) and how it can fit into your clients’ portfolios.

Data Center

1. U.S. Department of Energy, How Much Power is 1 Gigawatt?, August 2024.
2. Brookfield, Capturing the Benefits of Infrastructure Debt, July 2024.

Categories: Real Assets, Quarterly PM Insights

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Distributor: Foreside Funds Distributors LLC

SOME OF THE RISKS OF INVESTING IN THE FUND:

The Harrison Street Infrastructure Income Fund (the “Fund”) is not a complete investment program. An investment in the Fund involves a high degree of risk and should be considered speculative. Investors should consider the investment objectives, risks, charges, and expenses carefully before investing. For a prospectus with this and other information about the fund, please visit www.harrisonstpw.com or call 877-200-1878. Please read the prospectus carefully before investing. This communication is not an offer to sell Fund shares and is not soliciting an offer to buy Fund shares in any state where the offer or sale is not permitted.

Under normal market conditions, the Fund seeks to achieve its investment objectives by allocating at least 80% of its net assets (plus the amount of any borrowings for investment purposes) to income-oriented investments that provide exposure to infrastructure assets. The Fund intends to make direct and indirect investments in infrastructure loans, the equity and debt securities of infrastructure companies, and securities backed by infrastructure assets. As such, an investment in the Fund is subject to certain risks associated with the related ownership, use and operation of infrastructure and infrastructure-related assets in general, including: the burdens of ownership of infrastructure; local, national and international economic conditions; the supply and demand for services from and access to infrastructure; the financial condition of users and suppliers of infrastructure assets; changes in interest rates and the availability of funds which may render the purchase, sale or refinancing of infrastructure assets difficult or impracticable; changes in environmental laws and regulations, and planning laws and other governmental rules; environmental claims arising in respect of infrastructure acquired with undisclosed or unknown environmental problems or as to which inadequate reserves have been established; disruptive weather and environmental effects; changes in energy prices; changes in fiscal and monetary policies; negative developments in the economy that depress travel; uninsured casualties; insurance costs and industry competition; technological developments and disruptions; force majeure acts, terrorist events, under-insured or uninsurable losses; and other factors which are beyond the reasonable control of the Fund.
In addition to risks generally associated with debt securities and related investments (e.g., credit risk, interest rate risk), the Fund's investments in loans and loan-related investments, including loan participations and assignments, are subject to other risks. Although a loan obligation may be fully collateralized at the time of origination or acquisition, the collateral may subsequently decline in value, be or become illiquid or less liquid, or lose all or substantially all of its value. Many loans and loan-related investments are subject to legal or contractual restrictions on resale and certain loan investments may be or become illiquid or less liquid and more difficult to value, particularly in the event of a downgrade of the loan or the borrower.
The Fund intends to operate as a "non-diversified" fund under the Investment Company Act of 1940. Changes in the financial condition or market assessment of a single holding may cause greater fluctuation in the Fund's net asset value than in a "diversified" Fund. The Fund is not intended as a complete investment program but instead as a way to help investors diversify into infrastructure. Diversification does not ensure a profit or guarantee against a loss.
A multi-manager strategy involves certain risks. For example, it is possible that some private fund managers or sub-advisers may take similar market positions, thereby interfering with the Fund’s investment goal.
The adviser, sub-advisers and private fund managers manage portfolios for themselves and other clients. A conflict of interest between the Fund and these other parties may arise which could disadvantage the Fund. For example, a suitable but limited investment opportunity might be allocated to another client rather than to the Fund.
The Fund's investments in direct infrastructure debt and private funds will be priced based on estimates of fair value, which may prove to be inaccurate. Therefore, the value of the Fund's investments will be difficult to ascertain, and the valuations provided in respect of the Fund's private funds and other private securities will likely vary from the amounts the Fund would receive upon withdrawal of its investments. Additionally, given the limited liquidity of these investments, the Fund may not be able to alter its portfolio allocation in sufficient time to respond to any underlying material changes, resulting in substantial losses.
The Fund does not intend to list its shares on any securities exchange during the offering period, and the Fund does not currently expect a secondary market in the shares to develop. Thus, an investment in the Fund may not be suitable for investors who may need the money they invest in a specified timeframe.
You should not expect to be able to sell your shares other than through the Fund’s repurchase policy, regardless of how the Fund performs. If you are able to sell your shares other than through the Fund’s repurchase policy you will likely receive less than your purchase price.
Even though the Fund will offer to repurchase shares on a quarterly basis, you should consider shares of the Fund to be an illiquid investment. There is no guarantee that you will be able to sell your shares at any given time or in the quantity that you desire.
The shares are appropriate only for those investors who can tolerate risk and do not require a liquid investment.
The Fund may utilize borrowings and financial leverage and significant risks may be assumed as a result.
The amount of distributions that the Fund may pay, if any, is uncertain.
The Fund may pay distributions in significant part from sources that may not be available in the future and that are unrelated to the Fund’s performance, such as from offering proceeds, borrowings, and amounts from the Fund’s affiliates that are subject to repayment by investors, if any.
Please see the Fund’s prospectus for additional information regarding the risks associated with investing in the Fund.

All information contained herein is for informational purposes only and should not be construed as investment advice. It does not constitute an offer, solicitation or recommendation to purchase any security. Any discussion of general market activity, industry or sector trends, or other broad-based economic, market, political or regulatory conditions should not be construed as research or investment advice.

The information contained herein has been obtained from various sources and is believed to be reliable as of the date of publication, but the accuracy or completeness of the information cannot be guaranteed. The opinions expressed are as of the date of publication and are subject to change without notice.

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