CONTRIBUTORS
Tony Davidow, CIMA®
Senior Alternatives Investment Strategist
Franklin Templeton Institute
In the latest episode of the Alternative Allocations podcast, I had the pleasure of sitting down with Michael Bell, CEO of Meketa Capital. Michael and I discussed the growing opportunities within infrastructure investing, the various roles it can play in portfolios, and lessons learned from institutional allocators of capital.
We began by discussing the evolution and adoption of private markets in the wealth channel. “We've seen that mainstream shift really embrace education, which has been proliferated, with books and educational materials in the marketplace. Now we're seeing a shift with advisors in the wealth space who have embraced that education.” As advisors get more comfortable with the investments and product structures, they are beginning to use these tools across their practices.
Given Meketa’s institutional heritage, I probed specifically about lessons learned from institutions in allocating to infrastructure. Michael commented that, “Institutions and sovereign wealth funds have been allocating capital to infrastructure investments for the last 30 years. Now it's opening up for wealth management for the first time.”
Michael shared the areas where he sees the most attractive opportunities, and the themes that will likely play out over the next several years. He discussed the growth in digitization and energy transition. He noted the “massive amount of capital that's needed to support that growth. The transition to the next leg of the evolution of business through digitization is going to need a massive amount of capital.” He added that another trend has been the decarbonization or energy transition.
We explored the versatility of infrastructure investing and the various roles it can play in client portfolios. “Infrastructure can be viewed as an equity investment with bond-like features. Infrastructure can provide strong growth early in the development cycle, and as it matures, it really becomes much more of a yield investment vehicle.”
Infrastructure can also potentially be an effective inflation hedge. “The yield is not susceptible to inflation or rate changes. It's very much protected because most of the revenues that are generated off of infrastructure investments are contracted revenues.” The contracts are typically tied to the rate of inflation and adjust over time.
Lastly, I wanted to address one of the biggest challenges that I hear from advisors, which is manager selection. We addressed manager selection across all of private markets, and the importance of selecting the best managers, and avoiding the laggards.
Dispersion of Returns: Public vs. Private Markets
Sources: MSCI Private Capital Solutions, Morningstar. As of September 30, 2025.
Notes: The returns for Global Active Equity Funds reflect the annualized returns for the period January 1, 2005, to September 30, 2025. The returns for Real Estate, Secondaries, Private Equity, Venture Capital (VC), and Private Debt are the Internal Rate of Return (IRR) of the funds with vintage years from 2005 to 2018, as of September 30, 2025, for funds across all regions. Past performance is not an indicator or a guarantee of future results. Important data provider notices and terms available at www.franklintempletondatasources.com.
With most private markets, there is a large dispersion of returns between the top and bottom quartile managers (see above). Michael noted, “If you spend time evaluating large-cap equity, the manager dispersion between a top quartile manager and a bottom quartile manager may be 2% or 3%. In the private equity space, the difference between a top quartile manager and a bottom quartile manager is not 2% or 3%.” It can be 30%-40% depending upon the time period used.
Michael shared some great insights regarding the growing opportunities in infrastructure investing. We encourage you to check out this episode.
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WHAT ARE THE RISKS?
All investments involve risks, including possible loss of principal. The value of investments can go down as well as up, and investors may not get back the full amount invested.
Investment strategies involving Private Markets (such as Private Credit, Private Equity and Real Estate) are complex and speculative, entail significant risk and should not be considered a complete investment program. Such investments viewed as illiquid and may require a long-term commitment with no certainty of return. Depending on the product invested in, such investments and strategies may provide for only limited liquidity and are suitable only for persons who can afford to lose the entire amount of their investment. Private investments present certain challenges and involve incremental risks as opposed to investments in public companies, such as dealing with the lack of available information about these companies as well as their general lack of liquidity. There also can be no assurance that companies will list their securities on a securities exchange, as such, the lack of an established, liquid secondary market for some investments may have an adverse effect on the market value of those investments and on an investor's ability to dispose of them at a favorable time or price.
An investment in infrastructure projects can be exposed to numerous risks that may not offer recourse to the project sponsor and investors. For example, delays in obtaining necessary permits or a shift in political or public sentiment could hinder progress or cause a project to terminate. Other risks that can impact an infrastructure investment include, but are not limited to: construction delays, environmental concerns, contract or labor disputes, or financial/default risks from a deterioration in a sponsor’s credit. Additionally, the securities tied to such projects may be private in nature which increases the illiquid nature of such investment and reduce visibility into information about the investment. Private securities would not be listed on a public exchange, and no secondary market would be expected to develop.
Diversification does not guarantee a profit or protect against a loss. Past performance does not guarantee future results.
WF: 9586076