Infrastructure is the backbone of modern society—providing essential services that touch virtually every aspect of daily life, from transportation and energy to communication and water. Over the past two decades, the listed infrastructure market has evolved significantly from an emerging concept to a well-established and distinct asset class representing approximately 2% of global equity allocations (Exhibit 1).

As one of the earliest investors in the asset class, the Lazard Global Listed Infrastructure team has been at the forefront of listed infrastructure for 20 years. The team launched one of the first specialist portfolios with the inception of the Lazard Global Listed Infrastructure strategy in October 2005.

While infrastructure investing has evolved over time, we believe the fundamental principles for success remain unchanged. Reflecting on our experience managing client assets in this strategy, we have identified three core pillars that we believe underpin long-term success in infrastructure investing: 

1. Strict Definition of Infrastructure Is the Foundation of Stability

One of the most notable developments in recent years has been the broadening and changing definition of “infrastructure.” But while the universe of infrastructure investments has expanded, we believe investors should focus specifically on assets that provide essential services, demonstrate monopoly-like qualities, and can generate stable, low-volatility, long-duration cash flows. 

These types of assets, which we define as Preferred Infrastructure, are not exposed to the return-eroding forces of competitive markets like many other infrastructure assets are. For example, data centers have garnered significant attention due to soaring valuations and a compelling investment narrative linked to the explosive growth of artificial intelligence. But we believe these assets lack the key characteristics of core infrastructure namely:

We also avoid companies such as merchant power generators, construction companies, and infrastructure in emerging markets—areas that do not align with our definition of Preferred Infrastructure. Instead, we maintain a rigorous and disciplined approach, focusing on companies that have higher revenue predictability, profitability, and lower volatility. This includes regulated utilities, toll roads, airports, railroads, broadcast towers and assets only in OECD (Organization for Economic Co-operation and Development) countries (Exhibit 2). 

2. Valuation Discipline Is Key to Long-Term Growth

While listed infrastructure companies are not typically associated with rapid earnings growth, vigilance around valuation multiples is critical for success. In our view, the benefits of the asset class are best realized through an active, selective approach—one that combines valuation discipline with strict criteria for selecting high-quality companies.

Our investment process prioritizes deep fundamental analysis, evaluating characteristics such as regulatory structures, demographic profiles, and modeling volume and pricing dynamics of the underlying assets. This enables us to exploit any discrepancies between the market’s pricing and an asset’s intrinsic value.

Today, the issue of valuation is particularly crucial. Among the nearly 90 stocks within our investable universe, we believe two-thirds are overvalued today.

Exhibit 3 shows a wide dispersion in our value-ranked return expectations across our Preferred Infrastructure Universe. Each bar represents a stock in our Preferred Infrastructure Universe and our expected annual return over three years, based on the assumption that all of the stocks will trade at our valuation in three years’ time. The chart shows the extreme level of dispersion between inexpensive and expensive companies in our universe.

As such, we are very selective in finding opportunities that not only meet our strict criteria but also align with the valuations required to achieve long-term returns.

The issue of overvaluation is even more pronounced in private infrastructure markets, where the premiums paid for assets continue to exceed historical norms. For example, private equity funds acquiring UK water assets have paid, on average, a 23% premium to Regulated Asset Base (Exhibit 4).  Whereas listed UK water stocks have, on average, traded around 1x RAB, a substantial discount to their PE peers.

Lastly, unlisted airport transactions have traded at a 34% premium, on average, compared to listed airports - excluding the notable COVID period where listed airport valuations briefly exceeded private market valuations (Exhibit 5). 

3. Short-Term Volatility Creates Long-term Alpha Opportunity

In recent years, investors have justified the valuation premium in private markets due to the lower-volatility return profiles that private vehicles have historically delivered. While we recognize the stabilizing role that private allocations can play in a diversified portfolio, we take a different view on short-term market volatility in listed infrastructure: We see it as an opportunity to generate alpha.

While often perceived as a risk, volatility can uncover mispricing opportunities. We believe the ability to actively trade in these markets is an advantage that enables us to construct portfolios that are well-positioned to deliver sustainable, long-term returns.

Over time, our approach has demonstrated resilience. While listed infrastructure may exhibit greater short-term volatility compared to private market allocations, our portfolio has historically experienced significantly lower drawdowns than global equities during market sell-offs (Exhibit 6). 

This disciplined and opportunistic approach—utilizing short-term volatility to our advantage—has proven to be a significant driver of returns. Over the last 20 years, GLIF has produced superior risk-adjusted returns in comparison to listed comparable indices (Global Listed Infrastructure Index and MSCI) while maintaining daily liquidity throughout (Exhibit 7). 

Conclusion

For over 20 years, global listed infrastructure has offered diversification in unpredictable times, while delivering reliable income and protection from inflation. With its unique combination of stability, inflation protection, and growth potential, we believe global listed infrastructure continues to be a compelling choice for investors seeking stability in a portfolio.