While real estate remains a major component of institutional portfolios, recent fundraising trends and allocation intentions suggest growing conviction in infrastructure as a core private markets allocation.

Recent data from Aviva Investors’ 2026 Private Markets Study provides useful context. Real estate continues to represent the largest allocation within institutional private markets portfolios, accounting for roughly 38% of allocations when equity, debt and long income strategies are combined. Infrastructure remains smaller at around 21% when equity and debt strategies are combined, but the gap has narrowed materially in recent years.

More importantly, future allocation intentions suggest infrastructure is attracting some of the strongest investor convictions across private markets. According to the Aviva study, infrastructure equity stands out as the asset class with the strongest net increase in allocation intentions. Asset-based lending and infrastructure debt continue to gain traction, while more niche areas, including nature-based solutions, are expected to see increased allocations.

“Infrastructure’s growing popularity reflects both changing market conditions and a broader evolution in how investors think about real assets,” commented Anthony Curl, CIO at Gravis Capital Management.

Historically, real estate has been the most accessible alternative asset class for institutional investors. It has a longer track record, is widely understood, and has traditionally offered investors a relatively straightforward way to diversify away from equities and bonds. Infrastructure, by contrast, has been more difficult to access and has been less understood by investors and consultants.

That dynamic has changed considerably in recent years. “Infrastructure has existed for a long time, but historically it was funded by a narrower investor base,” Anthony continued. “As the market has broadened and become more accessible, infrastructure is increasingly becoming a core strategic allocation.”

Several forces are driving this shift. The first is structural. “Infrastructure is benefiting from powerful long-term secular themes that continue to generate large-scale investment demand in the UK and globally,” explained Anthony. “The energy transition, electrification, digital connectivity and rising AI-driven power demand are creating investment opportunities that are relatively independent of the economic cycle.”

The second factor is cyclical. Higher interest rates have created significant pressure across property markets over the past several years. Rising cap rates have compressed valuations across many sectors, while a large volume of debt originated during the low-rate environment now faces refinancing at materially higher borrowing costs with a maturity wall emerging.

Infrastructure has generally proven more resilient during this environment. “Infrastructure tends to have a smoother valuation profile because cash flows are generally more contractual in nature, rather than being directly exposed to economic risk,” Anthony said.

Inflation has also become a more prominent consideration for institutional allocators. The return of persistent inflation has increased demand for assets capable of providing explicit or implicit inflation protection. “Infrastructure assets often benefit from inflation-linked revenues embedded within long-term contractual structures, making them increasingly attractive for liability-driven investors seeking stable real returns,” Anthony continued. “This helps explain why infrastructure is increasingly viewed as one of the highest-conviction areas within private markets.”

Regulation is also becoming a significant tailwind. For insurers, regulatory frameworks increasingly favour infrastructure debt, particularly in Europe and the UK. Solvency regimes reward assets with predictable long-term contractual cash flows that align closely with insurers’ liabilities, naturally benefitting infrastructure strategies, although historically more infrastructure debt than equity.

In the UK, reforms such as the Mansion House agenda have also been explicitly designed to encourage greater investment into long-term productive assets, including infrastructure.

“Regulation increasingly supports infrastructure investment, particularly for insurers,” Anthony notes. “Infrastructure fits naturally into that framework because of the predictability of its cash flows.”

Still, the story is not one of real estate falling permanently out of favour. “The valuation reset triggered by higher interest rates is creating attractive entry points across several property sectors for long-term investors. As refinancing pressures begin to ease and markets continue adjusting to a higher-rate environment, some of the worst of the repricing cycle may now be nearing completion.”

Importantly, Anthony believes the distinction between infrastructure and real estate itself is becoming increasingly blurred.

“Assets such as data centres, telecommunications towers, logistics platforms, healthcare and energy-linked property increasingly sit at the intersection of both sectors,” he said. In many cases, investment strategies could reasonably be classified under either infrastructure or real estate depending on how managers position them.

The Aviva report itself highlights this evolution, noting that “the real story is not infrastructure versus real estate, but how the two increasingly overlap.”

This convergence is also reshaping how institutions think about portfolio construction more broadly. Rather than treating infrastructure and real estate as competing buckets, many allocators are increasingly approaching both through the broader lens of real assets. These are physical assets capable of generating long-term cash flows, whether through occupancy, service provision or essential infrastructure delivery.

“Investors are less focused on labels and more focused on the underlying cash flow and risk characteristics of the assets themselves,” Anthony said.

This evolving approach to real assets is something Gravis has been focused on for many years, with specialist expertise investing across infrastructure, renewable energy, real estate and asset-backed lending strategies.

“As investor demand continues to evolve, we are seeing increasing interest in strategies that combine resilience, income generation and exposure to long-term structural growth trends,” Anthony concluded. “At Gravis, our experience across both infrastructure and real estate means we are well positioned to help investors access opportunities across these increasingly interconnected parts of the market, while maintaining a focus on long-term capital preservation and sustainable income generation.”

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