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 to a core opportunity for wealth portfolios because it combines growth, income, inflation protection, and low correlation to traditional assets. He defines infrastructure as durable assets that underpin the economy and often have contracted revenues, with growth themes coming from energy transition, data centers, AI, and broader digitization.
A major distinction in the discussion is between greenfield and brownfield projects. Greenfield assets are brand-new builds that require heavy upfront capital and often produce little or no yield for years, while brownfield assets are more mature and tend to generate steadier income. Bell also distinguishes public infrastructure, which looks more like equity beta, from private infrastructure, which gives investors exposure to the underlying assets and typically carries different volatility and return characteristics.
Bell emphasizes that private infrastructure should be treated as a long-term allocation, not a semi-liquid trade. He says manager selection is critical because private-market return dispersion is wide, persistence among top managers can be meaningful, and many wealth advisors lack the data and resources institutions use. He expects private markets in wealth portfolios to expand from roughly 2% to 3% today toward 20% to 25% over the next decade or 15 years, driven by education and higher-quality products.
Key takeaways
- Bell says infrastructure offers growth, income, inflation hedging, and defense because many revenues are contracted over 10-, 20-, or 30-year periods.
- Bell views greenfield infrastructure as a capital-intensive growth phase and brownfield infrastructure as a more mature, yield-generating phase.
- Bell says private infrastructure differs from public infrastructure because investors own underlying assets rather than public-company equity, reducing public-market-style volatility.
- Bell argues manager selection is the key private-market decision because top-to-bottom performance dispersion can be 15% or more in private equity and similar dynamics apply across private assets.
- Bell expects wealth portfolios’ private-markets allocation to rise from about 2% to 3% toward 20% to 25% over the next decade or 15 years.
Notable quotes
“Infrastructure is an interesting asset class in which it spans income yield component but also a growth component”
“A green field investment is a brand new build from scratch. It is a new data center that is you buy the land”
“In the public arena, you are investing in the equity of energy companies, for example. In the private arena, you're investing in the assets of those same companies”
“I think you're hitting the primary issue in the industry that is manager selection. Manager selection matters”
“We're seeing this shift from education to execution. So, right now, we're starting to see that 2 and 3% grow to four and 5%”
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
- income and cash flow
- public vs private infrastructure
Companies and tickers mentioned
- BEN
- Meketa Capital
- Primark Capital
- Franklin Templeton Private Markets
- Latham & Watkins
- KPMG
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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.
