The Infrastructure sector as a whole is changing and the investment landscape may never look the same…..

Global supply chains are undergoing a transformative phase, influenced by geopolitical shifts that prompt a reassessment of trade dynamics. The momentum toward onshoring and nearshoring is building, leading to increased investments in critical logistics infrastructure like railways and ports, and despite favourable conditions for the infrastructure asset class, managers face a shifting landscape. The era of easily accessible cheap financing, which previously bolstered returns, has ended, requiring the adoption of alternative strategies for value creation. Selectivity is crucial, with an expected greater dispersion in manager returns.

The macroeconomic environment has impacted fundraising, resulting in a slower year for the industry. In the secondary market, discounts are emerging for the first time, offering a distinctive opportunity for those with available capital to acquire quality assets at more appealing entry points and structures. Infrastructure as an asset class is gaining prominence due to its resilience amid persistent inflation and recent market volatility. Its indispensability to the economy, combined with long-term, inflation-linked contracts spanning decades, provides stability in turbulent times.

Structural trends further enhance infrastructure investment prospects. The ongoing global energy transition means a reconfiguration of the energy system and substantial cross-sector investments for decarbonisation. The expansion of digital infrastructure worldwide, including fibre broadband, mobile/cellular towers and data centres, caters to the growing demand for connectivity. Despite infrastructure's resilience in the past year, the true potential lies in forthcoming opportunities, and in the concept of next generation infrastructure.

Next generation infrastructure embodies forward-looking trends, particularly the transition to a low-carbon economy, a significant investment opportunity for private markets. The ongoing digital transformation requires physical infrastructure to support the surging demand for high-speed internet, mobile data transmission and data storage facilities. In addition, Governments' focus on self-sufficiency and security is prompting increased investments in the domestic industrial infrastructure space.

The transition to a low-carbon economy is emerging as a significant force reshaping markets and the broader economy. While the low-carbon transition unveils investment opportunities, it also introduces new dimensions to risk management. Investors must now carefully assess the evolving landscape of costs, technologies and value-chain dynamics. The electrification trend is particularly noteworthy across transportation and power generation, emphasising the growing importance of batteries and energy storage systems and is poised for substantial growth.

Change in Hiring Strategies….

These changes in supply chains, geopolitical shifts and the broader transition to next generation infrastructure have several implications for hiring:

Skill Requirements:

As infrastructure undergoes significant changes and digital transformation, there will be an increased demand for individuals with skills in technology, data management and digital infrastructure development.

Professionals with expertise in sustainable practices and the low-carbon economy will be sought after as organisations align with environmental goals.

Adaptability:

Managers and employees need to be adaptable to the evolving landscape of infrastructure investment. The shift from cheap financing to alternative value creation strategies requires a workforce capable of embracing change.

The emphasis on selectivity and the anticipation of greater dispersion in manager returns necessitate a workforce that can navigate uncertainties and make strategic decisions.

Industry Knowledge:

Hiring managers may prioritise candidates with a deep understanding of the infrastructure asset class, including its resilience, long-term contracts, and the ability to navigate market volatility.

ESG Expertise:

With the focus on decarbonisation and sustainability, professionals with expertise in ESG practices will be vital in ensuring that infrastructure projects align with environmental and social responsibility standards.

Strategic Thinking:

Professionals capable of strategic thinking, particularly in terms of aligning with long-term structural trends and the transition to a low-carbon economy, will be highly valued in the hiring process.

In summary, the evolving landscape of infrastructure investment, coupled with geopolitical and market shifts, will require a workforce that is adaptable, knowledgeable, and capable of navigating the complexities of next generation infrastructure. Hiring strategies should focus on acquiring talent that aligns with the changing demands and strategic priorities of the infrastructure sector.

Get in touch with Rory Callow at rcallow@jmes.com.au