What To Know About the Hottest Corner of the Semiliquid Market

Funds that invest in privately held infrastructure like toll roads and data centers held $31.7 billion in assets as of mid-2026, and investors may be tempted to dive in.

Here are three factors they should consider first:

• The direct infrastructure category includes a diverse set of assets, each with different risks and rewards.
• Since most of these funds are relatively new (16 of 22 vehicles launched between 2023 and 2025), they haven’t dealt with significant redemption requests.
• Although borrowing at the fund level isn’t widely used in direct infrastructure at the moment, it’s something investors should watch.

Let’s dig into each of those critical variables.

Navigating the Infrastructure Menu

A diverse group of assets is rolled up under the infrastructure umbrella, but the risks associated with those assets differ.

The asset class is most often sliced into four subsectors—core, core plus, value added, and opportunistic—with the risk of loss increasing as one moves from core to opportunistic. Investors and financial advisors should thus weigh the risk/reward profiles of each and their portfolio needs before making an allocation decision.

Core assets are established, operational assets with regulated cash flows whose returns are typically income-based. Examples include toll roads, airports, and water systems.

Core-plus assets are also operational but carry additional risks relating to growth, expansion, or recontracting, which introduces capital appreciation into their expected returns. Some examples are fiber networks and contracted storage facilities.

Value-added assets can have substantial development risk relating to platform buildouts, turnarounds, or operational improvement projects; accordingly, they have greater capital appreciation potential. Data center development is a timely example, and one that has grown in prominence amid the artificial intelligence buildout.

Opportunistic assets have private equitylike returns in exchange for risks relating to construction, merchants, or politics. Examples include early-stage buildouts for fiber, data center, and AI-driven power and cooling projects.

Fundraising data from the past two decades show that each bucket made up a substantial portion of private fund infrastructure allocations, accounting for anywhere between 15% (core plus) and 33% (core) of assets.

The Liquidity Test: Understanding Limits and Prorations

The lack of seasoning on these direct infrastructure vehicles means that their investors have yet to face true liquidity tests. Such tests have already played out in nontraded REITs in 2023 and in private credit this year.

As Morningstar has documented, semiliquid funds intentionally limit how much money investors can redeem to harvest an illiquidity premium. As a result, the amount each investor receives back is a function of how much other investors asked for in aggregate during a given redemption window, which typically occurs quarterly. In periods of stress and negative headlines, redemption requests can exceed the limit.

If that happens, managers may choose to redeem an additional 2 percentage points beyond the stated limit during a given redemption window, such as increasing a 5% tender offer to 7%. They are not obligated to exercise that discretion, however, and investors should not expect they will do so. When requests exceed a fund’s tender-offer limit, the manager prorates each investor’s redemption request; that is, investors only get back a proportional amount of what they asked for.

Broad-based inflows have so far prevented such a scenario from unfolding across most of the largest direct infrastructure strategies.

Across the three largest direct infrastructure strategies, only Brookfield Infrastructure Income has redeemed more than 1.0% of outstanding shares during a single quarter thus far. Brookfield, however, reported that more than 90% of the shares it repurchased in the last two quarters of 2025 were repurchased by a Brookfield-managed fund, suggesting third-party redemption pressures have been negligible, as they have been for both KKR and Blackstone’s semiliquid offerings.

An Area to Watch: Leverage

Fund-level financial leverage is not currently a popular strategy across direct infrastructure managers—just five of 22 strategies reported nonzero outstanding fund-level borrowings in their most recent public filings.

While leverage can enhance returns (or detract from them when the cost of leverage is greater than unleveraged returns), it can also help finance new asset acquisitions or allow a fund to meet share repurchase requests without selling assets. The presence alone of permanent financial leverage isn’t good or bad, but it should at the very least be considered alongside other potentially distinguishing characteristics, like liquidity terms (redemption amounts and cadences) and fund expenses.

The greenness of many of these strategies makes the trajectory of permanent fund-level leverage across the category an area to monitor. More than half the peer group reported net asset values of less than $500 million as of the most recent filings. As a larger portion of the category achieves scale, it is possible that more managers will employ permanent fund-level leverage.