Unlisted infrastructure stands out amidst persistent inflationary pressures for its ability to pass rising costs through to consumers.
Infrastructure holdings are essential assets with high barriers to entry that form a vital pillar of the economy. These include toll roads, regulated utilities, telecommunications, and battery storage. As such, their underlying cash flows are highly resilient and are often governed by long-term contracts with built-in CPI linkages.
The Wilson Asset Management (WAM) Alternative Assets investment team, responsible for WAM Alternative Assets (ASX: WMA) and the WAM Real Assets Fund (WRAF), believes this structural inflation alignment offers a powerful mechanism for robust returns in the current macroeconomic environment.
By deploying capital into infrastructure, investors can acquire resilient, inflation-protected revenue streams that have the potential to generate real returns – even when public equity and bond markets are under pressure.
This inflation alignment is not just theoretical. Historically, unlisted infrastructure has outperformed almost every traditional asset class during periods of heightened inflation, shown in Figure 1 below.
This is mainly driven by the transmission of inflation to consumers: as consumer prices rise, contractual asset revenues adjust upward in tandem, preserving the inflation-adjusted margins of the businesses.
Figure 1: Asset returns during above and below average inflationary environments. (Source: Macquarie Asset Management)
Inflation has remained stubborn across most global economies in 2025 and 2026, exacerbated by geopolitical tensions, stronger- than-expected GDP growth, labour dynamics and the current oil crisis stemming from the Middle East conflict.
Considering this, and the expectation that persistent inflation will continue over the medium term (Source: RBA), we see infrastructure as an attractive source of inflation protection and a strong driver of returns in real asset portfolios over the medium term.
In addition, infrastructure also looks attractive on most fundamental valuation measures. Historically, private infrastructure has traded at an average premium of 2.8x to US equities, and 3.6x to global equities between 2008 and 2024, on an EV/EBITDA multiple basis (Source: Macquarie). However, this dynamic inverted in mid-2024 as the spread relative to US equities turned negative. This discount suggests a highly compelling entry point for private infrastructure compared to public markets.
What to look for in infrastructure asset managers
The WAM Alternative Assets investment team specialises in manager selection, aiming to identify the best-in-class managers in the alternatives space. In the infrastructure sector one of the key attributes we seek in managers is the ability to acquire assets with defensive, long-term moats. The view is to then actively future proof the assets, leveraging operational expertise to transition businesses into highly resilient infrastructure platforms.
A key example of this strategy in action is our partnership with Palisade Group. The WAM Alternatives team have invested in the Palisade Diversified Infrastructure Fund (PDIF) and the Palisade Renewable Energy Fund (PREF) within the WAM Alternative Assets Fund (ASX: WMA) and recently backed the Palisade Impact Fund via an investment within the WAM Real Assets Fund (WRAF).
Our conviction in Palisade Group lies in their deep technical expertise in infrastructure, their strong deal sourcing edge in the Australian infrastructure mid-market, and their disciplined portfolio construction approach.
Figure 2.1: Assets held by the Palisade Group (Source: Palisade Group)
In an investment landscape defined by sticky inflation, public market volatility and large industrial shifts, we believe unlisted infrastructure has become increasingly important in a diversified portfolio. By locking in robust, contractual and inflation-linked cash flows backed by essential hard assets, investors gain insulation from rising macroeconomic costs.
