What's the read on real assets and infrastructure, and how is positioning shifting?

A structural shift in the global economy is repositioning real assets and infrastructure as essential portfolio components rather than diversifiers [7, 12]. The post-Cold War era of stable globalization is giving way to a fragmented, inflation-prone world characterized by geopolitical shocks, supply chain re-shoring, and deglobalization [4, 22, 30]. This new regime invalidates the traditional 60/40 portfolio, as persistent inflation and high government debt levels render bonds an unreliable hedge against equity risk [6, 12, 27]. Analysts contend that authorities will be forced to **'run the system hot'** to inflate away the real value of debt, making inflation-resilient assets a necessity [4, 6, 10]. This macroeconomic backdrop, which is shifting the world from a "savings glut" to a "savings deficit" to fund re-industrialization , underpins widespread recommendations to increase allocations to real assets, infrastructure, and commodities [1, 15, 16, 19, 21].

The definition of infrastructure itself is undergoing a significant transformation, moving beyond traditional assets like toll roads and ports . The primary driver of this evolution is the rise of artificial intelligence, which is forcing a paradigm shift from asset-light software models to asset-heavy investments in physical infrastructure . Brookfield Asset Management identifies building AI infrastructure, specifically data centers and their power supply, as its largest and fastest-growing investment theme . The demand is so acute that the primary scarcity in AI is now considered to be **real estate and finding suitable locations** for GPUs, a challenge that has surpassed the difficulty of acquiring the chips themselves . This digital build-out is complemented by investment themes in the energy sector—viewed by some, like CPP Investments, as an "energy addition" that requires continued investment in oil and gas alongside renewables —and the re-industrialization of Western economies, which involves repurposing legacy manufacturing for defense and robotics [4, 26].

Despite the strong strategic rationale, investor positioning reveals a disconnect between advice and action. J.P. Morgan Private Bank is actively advising clients to add real assets and infrastructure [1, 2, 24], yet many high-net-worth individuals hold unusually high levels of cash . Similarly, large family offices remain **significantly under-allocated** to core real estate and infrastructure relative to their stated targets . This suggests a reservoir of latent capital waiting to be deployed. In contrast, sophisticated institutional investors are moving decisively. CPP Investments has combined its infrastructure, energy, and real estate teams to jointly pursue data center investments , while Morgan Stanley's real assets division is particularly active in the U.S. and Japanese markets . However, some large institutions with specific liability-matching needs, such as insurer Swiss Re, maintain a heavy allocation to fixed income but are selectively growing their exposure through niches like infrastructure debt, which is expected to grow due to European re-armament needs [22, 29].