Gordon Bajnai, a London-based partner and head of global infrastructure at Campbell Lutyens, an alternative investment placement agent and secondary market advisory firm, said the energy transition and decarbonization are big winners from the infrastructure law, which could drive allocations into the renewable infrastructure sector.
"The next concern is that public funding should not crowd out private capital, but multiply it instead," Mr. Bajnai said.
Investors are attracted to the asset class as an inflation hedge. However, infrastructure's performance has been "resilient," producing a 13.4% internal rate of return for the year ended March 31, according to Preqin's third-quarter 2021 infrastructure report. Overall, infrastructure funds raised a combined $38 billion in the third quarter, the third highest fundraising quarter in the past six years, Preqin said. However, this was after a slow fundraising year in 2020, when infrastructure funds raised a total of $54.6 billion, 17.6% less than in 2019, Preqin data shows.
Despite the law's November signing, managers said they don't anticipate the increased funding to create additional infrastructure investment projects for at least a year or more. The reason is that the additional money is being dispersed from the federal government to state and local governments. The money is not only being distributed to the states and local governments through existing structures such as the Clean Water State Revolving Fund, which provides communities low-cost financing for water quality infrastructure projects, but also through new mechanisms that need to be created for the projects now being funded by the infrastructure law such as electric vehicle infrastructure, North Sky's Mr. Bernstein said.
"The actual opportunity for an infrastructure investor, by and large, won't materialize for a year plus," Mr. Bernstein said.
Mr. Munger at Vision Ridge Partners said his team is "very enthusiastic about the infrastructure law" because it will smooth over road bumps that had been in the way of adoption of renewable initiatives.
One example, Mr. Munger said, is the creation of a federal Grid Deployment Authority to finance and encourage the development of high-voltage transmission lines, giving U.S. Energy Department final authority to create national transmission corridors for clean electricity initiatives, Mr. Munger said. A few years ago, many attempts to build out the transmission lines needed to transport energy produced by renewable energy were stopped at the state and local levels, he said.