Why Infrastructure Credit

It’s been estimated that infrastructure represents a nearly $100 trillion global investment opportunity, driven by enormous megatrends and an immense need to replace or modernize the world’s existing infrastructure. Infrastructure credit is helping to bridge that gap, deploying capital into hard assets like data centers, fiber networks, ports, planes, and natural gas distribution.

The growth of the asset class comes down to a few factors. Capital needs by infrastructure borrowers are increasing significantly to fund project development and M&A. The U.S. deficit is at an all-time high and will likely continue to grow. And following the global financial crisis, infrastructure financing by banks has reduced meaningfully. With traditional forms of financings under more pressure – both the strain of government balance sheets and the retrenchment of banks – there’s huge opportunity for private capital to fill the void.

Between 2010 and 2025, infrastructure credit grew from less than 3% of the total infrastructure market to more than 15%. Along the way, it has matured from a relatively niche strategy into a $169 billion asset class and a foundational component of many investors’ private markets allocations. And yet, there is still significant room to run, because the need for capital keeps growing.

Infrastructure credit has many distinct benefits relative to corporate direct lending, or what we typically think of as private credit. Many of these are directly related to the core characteristics of infrastructure assets themselves. These are businesses that:

• Provide essential services and are mission-critical to their communities, resulting in greater demand inelasticity, pricing power, and volume certainty.
• Have high barriers to entry, due to vast capital requirements, regulatory hurdles, and operational complexity, resulting in high customer switching costs.
• Have highly contracted cash flows, often with minimum guarantees and inflation-linked escalators, resulting in greater predictability and lower volatility in market downturns.

The bigger difference shows up in the downside scenarios. Many infrastructure businesses are backed by hard assets – assets that are typically pledged as collateral in infrastructure lending – providing additional downside protection beyond cash flows alone. Infrastructure lenders also typically have first right of claim on these assets – the ability to take control of them in downturn and ultimately sell them to recoup value. As a result, the asset class has historically shown lower defaults, higher recoveries, and a significantly lower expected loss profile than equivalently rated corporate bonds.

Rigorous covenants are also often in place to protect cash flows and help insulate against other risks. Less competitive dynamics, particularly in middle-market lending, allow lenders to negotiate tighter documentation, enforce covenants, and maintain control in downside scenarios, mitigating risks seen in broadly syndicated and large-cap transactions, where ~90% of new 2024 issuance was covenant-lite.

While historically under-represented in private credit portfolios, infrastructure credit provides meaningful diversification benefits in terms of sector exposure and the contracted nature of the underlying revenues. The asset class has also demonstrated lower correlation to economic cycles than corporate direct lending over time, according to a study by EDHEC, since risks are more asset- or project-specific and can often be mitigated through careful structuring.

Overall, rather than simply adding another source of yield to investment portfolios, infrastructure credit introduces a differentiated return profile altogether. When this low-correlation, downside-protected asset class is paired with other asset classes, it is able to move the overall portfolio up the efficient frontier, boosting returns and reducing volatility.

Infrastructure credit is entering its prime, and for individual investors, the asset class can offer an attractive, income-focused return profile similar to that of direct lending – with the added security of real assets as collateral. But capturing this opportunity takes a manager who understands the underlying assets, not just credit.

Stonepeak launched its credit business in 2018 on top of a scaled infrastructure private equity platform we’d spent years developing across transportation, energy, and digital infrastructure. That means the same deep sector knowledge, origination channels, and industry relationships that drive our equity investing, applied through a credit lens. Today our credit business spans 30 dedicated professionals, over $3.0 billion in assets under management, and more than 100 issuers invested in.

To learn more about Stonepeak+, Stonepeak’s dedicated wealth solutions platform, and the firm’s approach to infrastructure and infrastructure credit investing, visit wealth.stonepeak.com.