Skip to main content


30 Sep 22 Insight Alternatives PATRIZIA

Allocating to unlisted infrastructure: Some size fits all

The father of Modern Portfolio Theory, Harry Markowitz, is reported to have said “diversification is the only free lunch.” Whilst he may have coined the term, the concept of diversifying one’s portfolio stems back well before the 1950s as investors seek asset classes that demonstrate little or no correlation to one another, to improve a portfolio’s risk return characteristics. Unlisted infrastructure is one such asset class, offering portfolios higher returns per unit of risk.

Since the turn of the 21st century, unlisted infrastructure has been a mainstream asset class for institutional investors in regions such as Canada and Australia, however, broadly speaking, investment in the unlisted infrastructure asset class in Europe by defined benefit (DB) funds stands at low levels, and is materially lower than unlisted real estate which has been an asset class staple for decades.1 Despite its current low uptake in Europe, we note that the inclusion of unlisted infrastructure provides an investor’s portfolio with uncorrelated equity-like returns, lower volatility and shallower drawdowns. The analysis in this paper concludes that a meaningful allocation to unlisted infrastructure is an attractive consideration for long-term investors, for all target return levels tested; albeit we note that it must be balanced with liquidity and access considerations.