Despite Concern Over Geopolitical Risk, Institutional Target Allocations to Infrastructure Grow to 5.9% in 2025, Finds Infrastructure Allocations Monitor published by Hodes Weill and Cornell University’s Program in Infrastructure Policy

Target allocations grew 40 basis points to 5.9% in 2025, representing an 80-basis-point increase since the survey launched in 2023

The gap between actual and target allocations has narrowed, with institutional investors remaining under-invested to the asset class by 100 basis points

Geopolitical risk emerges as the top concern among investors, with Canadian and European institutions pulling back on U.S. investments

Infrastructure portfolios delivered strong performance in 2024, with average returns at 9.6%, a rebound from lackluster levels in 2023

Investor sentiment remains positive, reflecting sustained investor confidence despite market volatility and geopolitical concerns

Digital and transportation infrastructure sectors remain in favor, as 28% and 19% of institutional investors, respectively, indicate an intention to increase deployment pacing over the next 12 months

The third annual Institutional Infrastructure Allocations Monitor, released today by Hodes Weill & Associates and Cornell University’s Program in Infrastructure Policy, revealed continued growth in institutional allocations to infrastructure, even as geopolitical concerns reshape investment strategies and geographic targets. Target allocations rose to 5.9% in 2025, representing a 40-basis-point increase over the past 12 months and an 80-basis-point increase since 2023, highlighting infrastructure’s expanding role in institutional portfolios. This growth represents a 7.1% increase in capital allocations year-over-year, implying the potential for an additional US$43 billion of investment (from survey participants).

To download the full report, please visit: www.hodesweill.com/research.

Institutions continue to narrow the gap between actual and target allocations, now under-invested by an average 100 basis points, as compared to 120 basis points in 2024. This narrowing may be attributed to a “numerator effect” as infrastructure investments delivered strong returns, while the pacing of commitments to new investments moderated and portfolios saw limited realizations and distributions. Infrastructure portfolios delivered strong performance in 2024, with average returns at 9.6%, a rebound from lackluster levels in 2023. Over a trailing three-year period returns averaged 9.4%, slightly ahead of target returns, and demonstrating resiliency in a volatile market. Included in the current year’s report for the first time are quartile benchmarks for returns, broken down by institution type.

Investor conviction remains positive, with an average score of 7.0 out of 10, reflecting sustained investor confidence despite market volatility. However, over the past year geopolitical instability emerged as the top concern for institutional investors globally, cited by 41% of respondents. The level of concern regarding geopolitical risk surpassed concerns regarding asset valuations and interest rate volatility – which were the top concerns last year. These perspectives can be attributed to heightened uncertainty surrounding global elections, trade policies and regional conflicts, including the potential impact on infrastructure-related legislation in the U.S. such as the Inflation Reduction Act (IRA).

Matt Hershey, Partner at Hodes Weill, said, “The survey was conducted amid a rapidly evolving geopolitical landscape. Notably, institutions are expressing a high level of concern about geopolitical volatility and its impact on investment objectives and intentions. Despite this, conviction remains positive, with continued confidence in infrastructure’s ability to deliver reliable, inflation-protected returns – reinforcing its role as a strategic portfolio allocation.”

Digital, transportation and energy infrastructure continue to attract institutional capital, with 71%, 66% and 64% of respondents, respectively, planning to increase or maintain allocations over the next 12 months. Within the digital infrastructure subsector, data centers are the most favored strategy, followed by cell towers, fiber and Internet of Things (IoT). Utilities, traditional renewables and battery storage lead the pack for energy infrastructure allocations, benefiting from enduring policy tailwinds and institutional demand for long-duration, inflation-protected income.

In terms of geographic focus for investment, 32% of investors expect to increase allocations to Europe and 25% expect to increase allocations to North America over the next 12 months, marking a reversal of trends noted in 2024, when North America was most favored. While U.S. based institutions remain committed to growing their portfolios domestically, Canadian and European investors have pulled back significantly from the U.S., with clear messaging about concerns regarding geopolitical risk. A Canadian public pension plan commented, “We are trying to make sense of the ever-changing tariff policy from the U.S. administration and its implications for the U.S. and the world as a whole”.

The report also noted that fewer institutions are considering first-time investments in new markets than they were in 2024. This cautious posture suggests that institutions are favoring deeper exposure to stable and familiar markets over diversification into new or higher-risk geographies.

The survey also revealed a continued preference for higher returning strategies offering enhanced yields, with institutions continuing to favor core-plus and value-add strategies. Institutions are prioritizing commingled funds, though institutions in EMEA and APAC noted growing direct and separate account activity. In regard to strategy, infrastructure debt is also gaining traction – particularly in the EMEA region – as institutions seek lower risk, yield-oriented alternatives with downside protection, particularly in a longer-for- higher interest rate environment.

ESG integration remains a meaningful consideration for institutional investors globally, but sentiment, priorities and practices are increasingly polarized. While 60% of institutions consider ESG at least moderately important, just 4% now rate ESG as extremely important – down from prior years. Australia, Canada and Europe continue to lead in ESG adoption, while support from U.S.-based investors is mixed and an increasingly political topic.

Dr. Rick Geddes, Founder and Academic Director of Cornell University’s Program in Infrastructure Policy, said, “Hodes Weill’s 2025 Infrastructure Allocations Monitor is a major contribution that will benefit academics and practitioners alike. Now in its third year, and more comprehensive than ever, it provides a window into institutional investing that all scholars of infrastructure will find indispensable.”

115 institutions from 25 countries participated in the survey, representing aggregate AUM exceeding US$10.6 trillion and portfolio investments in infrastructure totaling approximately US$520 billion.

About Hodes Weill

Hodes Weill & Associates is a leading, global capital advisory firm focused on real estate, infrastructure and other real assets. The firm has offices in New York, Hong Kong, London, Amsterdam and Tokyo. Founded in 2009, Hodes Weill provides institutional capital raising for funds, transactions, co-investments and separate accounts; M&A, strategic and restructuring advisory services; and fairness and valuation analyses. Clients include investment and fund managers, institutional investors, lenders, and public and private owners of assets and portfolio companies. For more information, please contact or visit www.hodesweill.com

*All U.S. regulated capital market and securities advisory services are provided by Hodes Weill Securities, LLC, a registered broker-dealer with the SEC, and a member of FINRA and SIPC, and internationally, by non-U.S. Hodes Weill affiliates.

About Cornell University’s Program in Infrastructure Policy

The mission of the Cornell Program in Infrastructure Policy is to improve the delivery of civil, energy, social, and digital infrastructure through dedicated, high-quality research, teaching, and public outreach efforts. We focus on the procurement, funding, alternative financing, and technological developments across the infrastructure industry. We maintain a network of scholars across multiple disciplines both inside and outside of Cornell University who share an interest in public policies impacting infrastructure delivery. We collaborate with partners in the public, private and non-profit sectors to develop and disseminate research, develop new educational courses, share industry best practices, organize webinars, and host conferences about infrastructure policy.

Disclaimer

For informational purposes only. This is not a solicitation to buy or sell any securities or securities products. Please refer to the full report for important disclaimers. The full report can be found at www.hodesweill.com/research

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