The transport and logistics sector has long attracted infrastructure investors, thanks to its essential services in markets with limited competition and high barriers to entry. What began as a focus on traditional core assets has now broadened to include more core+ investments. With the rise of new technologies and business models, such as electric vehicles (EVs) and autonomous vehicles (AVs), this evolving landscape presents a mix of challenges and opportunities (see Figure 1).
To better assess the infrastructure characteristics of potential investments, L.E.K. has developed a robust framework to help determine how ‘infrastructure-like’ an investment case is. This tried-and-tested framework offers a structured method for comparing potential targets, as shown in Figure 2.
Beyond the evolution from core to core+ (and even core++), there is an opportunity to re-think infrastructure investment opportunities more creatively. By applying the principles behind the infrastructure characteristics checklist differently, we can redefine one or two criteria at a time, opening the door to new possibilities.
This approach allows investors to explore areas where the underlying traits are infrastructure-like but involve a known risk in specific criteria. For instance, by redefining an asset from a physical entity to mission-critical data services, broader transport-related data services emerge as intriguing new areas for investment. Figure 3 illustrates how this thinking can generate new avenues for infrastructure investments beyond the traditional core and core+ categories.
Applying this framework unearths new and interesting opportunities that can diversify the risk and return profiles of traditional infrastructure portfolios.
If you’d like to explore these opportunities further, please get in touch.
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