Episode summary
Episode 36: Infrastructure Investing: Growth, Income, and Inflation Protection in One Asset Class...
Alternative Allocations
· · Hosts: Tony Davidow, Christine Gaze · Guests: Michael Bell
Summary
Michael Bell argues that infrastructure has moved from a niche institutional allocation into a mainstream wealth opportunity because it combines growth, income, inflation protection, and low correlation to traditional assets. He says the most compelling demand is coming from energy transition, digitization, data centers, and AI, all of which require large amounts of capital and create a steady pipeline of new deals.
A central theme is that infrastructure should be viewed by stage. Greenfield projects such as new data centers or cell towers require heavy upfront capital and behave more like growth assets, while brownfield assets tend to produce more stable yield. Bell also distinguishes private infrastructure from public infrastructure: public exposure is closer to equity beta, while private investing targets the underlying assets and generally offers lower volatility.
Bell stresses that private infrastructure is a long-term commitment, not a semi-liquid trade, and says manager selection is the most important decision because performance dispersion is wide. He expects the private markets allocation in wealth portfolios to rise from roughly 2% to 3% today toward 20% to 25% over the next decade, led by education and better-quality providers.
Key takeaways
- Michael Bell says infrastructure can provide growth, income, inflation hedging, and low correlation in one asset class.
- Bell expects roughly a quarter to a third of new deals to come from energy transition and a similar share from digitization themes like data centers and AI.
- He argues greenfield infrastructure is a growth phase first, while mature brownfield assets are more yield-oriented.
- Bell says private infrastructure is different from public infrastructure because investors are buying the assets, not the listed equity, which reduces volatility.
- He believes manager selection is critical because top- and bottom-quartile private market outcomes can diverge by 15% or more.
- Bell sees wealth portfolios' private markets allocation rising from 2% to 3% to 20% to 25% over the next decade.
Notable quotes
“Infrastructure as we view it, they're durable assets that really are the underpinning that drive our economy”
“infrastructure can really be viewed as almost an equity investment with bondlike features”
“So I get growth, I get income, I get inflation hedging and I also get defense because it has historically had low to negative correlation to traditional investments”
“Manager selection matters. In the private markets space, there are 20,000 reporting private managers out there with 60,000 funds that are out there”
How the episode opens
This is Alternative Allocations by Franklin Templeton, a monthly podcast where we share practical, relatable advice and discuss new investment ideas with leaders in the field. Please subscribe on Apple, Spotify, or wherever you get your podcast to make sure you don't miss an episode. Here is your host, Tony Davidau. Welcome to the latest episode of the alternative allocations podcast series. I'm thrilled to be joined today by Michael Bell from Makita. Welcome, Michael.
Thanks for having me here, Tony. Really appreciate it.
So, Michael, we've been having this discussion a while, and we're really excited about infrastructure, which is an area that we've started to provide some research on. You guys have been doing a lot of work on it. Maybe if you can start by giving us a little bit of your background and what you've been doing at Makita and then we'll delve in a little bit more on infrastructure and maybe some of the lessons learned from the institutional marketplace.
Sure. What we have done over the last three plus years and you know this industry from the whole democratization trend in alternatives to begin with starting 5 6 7 years ago the evolution of that has really gone through product proliferation to education and now we're seeing movement into execution of that and so what we've done at Makita we have looked at migrating the best of the institutional process and really bringing that into the wealth management space. Okay.
And so whether it's product development, okay, whether it's manager review and selection process or asset allocation and bringing educational materials from the Makita institutional business into wealth management. So it's really been that dynamic shift to help drive that market and help expand the market. So what we've seen as a nent market 3 4 5 years ago that we viewed was an educated bet of the expansion and democratization trend has really become much more mainstream over the last several years or so.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- infrastructure investing
- private markets allocation
- inflation hedging
- public vs private infrastructure
- income and low correlation
Companies and tickers mentioned
- BEN
- Meketa Capital
- Primark Capital
- Franklin Templeton Private Markets
- Latham & Watkins
- KPMG
Watch the episode
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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Alternative Allocations, this episode and its artwork belong to Franklin Templeton. Octagon is not affiliated with the show; this page is an independent summary.
