Infrastructure
Real assets fund returns reach decade-plus high
November 17, 2022
Capital returns for real assets investment funds have reached a post-global financial crisis peak. Rolling one-year IRR for real assets—which includes oil and gas, infrastructure, metals, timber and agriculture—rose to 22.5% through Q1 2022, according to PitchBook's 2022 Global Fund Performance Report.
Infrastructure investments account for the bulk of the capital pouring into real assets funds, but the swinging values of oil and gas assets—which shift in time with volatile commodities prices—also impact overall real assets IRR. Oil and gas one-year IRR peaked at 45.9% through Q4 2021, and continued showing strong performance through Q1 2022.
While wage inflation and the rising cost of raw materials have squeezed real assets under development and construction, investing in infrastructure projects—especially core investments, which tend to provide steadier cash flows than strategies such as VC and PE—is regarded as a natural hedge against inflation. Many projects, such as toll roads and telecommunications infrastructure, experience steady demand for their services, and once built, tend to have low operating costs.
The US government's commitment to greater infrastructure spending through both the Bipartisan Infrastructure Law and this year's Inflation Reduction Act is also contributing to sunny skies over real assets funds.
Featured image by Kodda/Getty Images
Infrastructure investments account for the bulk of the capital pouring into real assets funds, but the swinging values of oil and gas assets—which shift in time with volatile commodities prices—also impact overall real assets IRR. Oil and gas one-year IRR peaked at 45.9% through Q4 2021, and continued showing strong performance through Q1 2022.
While wage inflation and the rising cost of raw materials have squeezed real assets under development and construction, investing in infrastructure projects—especially core investments, which tend to provide steadier cash flows than strategies such as VC and PE—is regarded as a natural hedge against inflation. Many projects, such as toll roads and telecommunications infrastructure, experience steady demand for their services, and once built, tend to have low operating costs.
The US government's commitment to greater infrastructure spending through both the Bipartisan Infrastructure Law and this year's Inflation Reduction Act is also contributing to sunny skies over real assets funds.
Related read: 2022 Global Fund Performance Report
Featured image by Kodda/Getty Images
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