Real Assets Archives

Property Companies (PropCos) represent a fundamental structure within real estate investment landscapes across Europe. These dedicated entities are designed to hold, manage, and optimise real estate assets, creating a clear separation between property ownership and operational activities.

Real estate remains one of Europe’s most complex asset classes, presenting unique challenges that extend far beyond simple property ownership. In 2023, Europe concentrated nearly 21% of real estate assets under management by investment managers globally, highlighting its significance in the international investment landscape.Real estate remains one of Europe’s most complex asset classes, presenting unique challenges that extend far beyond simple property ownership. In 2023, Europe concentrated nearly 21% of real estate assets under management by investment managers globally, highlighting its significance in the international investment landscape.

The intricate tapestry of varying regulatory frameworks, accounting standards, and market practices across European jurisdictions creates a multi-dimensional administrative challenge that even seasoned investment professionals find daunting.

In this article, you will explore the key challenges and benefits of outsourcing real estate administration in Europe, providing valuable insights for investment managers navigating this complex landscape

Key Challenges in European Real Estate Administration

1. Regulatory Complexity

The European real estate landscape is characterised by its regulatory diversity, with each jurisdiction maintaining distinct frameworks governing property ownership, management, and taxation. For instance, German real estate regulations differ substantially from those in France or Spain, with unique requirements regarding property registration, tenant rights, and corporate governance.

Multiple GAAP requirements further complicate the picture. While some jurisdictions adhere to IFRS standards, others maintain country-specific accounting practices. IFRS emphasises that global standards provide transparency, accountability, and efficiency to financial markets around the world, but implementation varies significantly across Europe.

2. Real Estate Accounting Complexities

eal estate accounting presents unique challenges that extend beyond standard corporate accounting practices. Asset-level income and expense treatment requires detailed tracking and allocation, particularly for mixed-use properties or those with multiple tenants.

Tenant incentives and service charge management add another dimension of complexity. The proper accounting treatment of rent-free periods, tenant improvements, and service charge reconciliations requires specialized knowledge and careful documentation. These elements can significantly impact financial performance metrics and must be handled with precision.

3. Asset Diversity Management

European real estate portfolios often encompass diverse asset types, each with unique administrative requirements. Residential, commercial, and industrial properties present distinct challenges in terms of tenant management, maintenance requirements, and regulatory compliance.

Strategy-specific accounting requirements further complicate the picture. Core, value-add, and opportunistic investment strategies each present unique accounting challenges, from capitalisation policies to performance metric calculations. PropCo administrators must tailor their accounting approaches to align with the specific investment strategies being employed.

4. Property Manager Coordination

Effective PropCo administration requires seamless coordination with property managers who oversee day-to-day operations. This coordination is complicated by the diverse property management systems used across Europe, each generating data in different formats and with varying levels of detail.

Reconciling inconsistent reporting formats represents a significant challenge. Property managers across different European jurisdictions often employ localized reporting templates and methodologies.

The transition from cash to accrual accounting presents another coordination challenge. While property managers typically focus on cash-based operational metrics, PropCo administrators must convert this information to accrual-based accounting for financial reporting purposes.

5. Cross-Border Reporting Challenges

PropCo administrators managing pan-European portfolios face significant reporting challenges. Converting local GAAP financial statements to group-level reporting standards requires specialised knowledge and careful reconciliation. This process is particularly complex for portfolios spanning multiple jurisdictions with divergent accounting practices.

Timeline coordination with diverse local teams presents logistical challenges. Different reporting timelines, holiday schedules, and business practices across European jurisdictions can complicate the consolidation process.

PropCo administrators must develop efficient coordination mechanisms to ensure timely, accurate reporting despite these variations. Maintaining compliance across jurisdictions requires vigilant monitoring of regulatory changes.

6. Language and Communications Barriers

The multilingual nature of European real estate markets introduces documentation management challenges. Property-related documents, contracts, and regulatory filings may be in various languages, requiring translation and interpretation for effective administration. This multilingual environment increases the risk of misunderstandings and administrative errors.

Legal and financial terminology varies significantly across European jurisdictions, even when using the same language. These variations increase the risk of misinterpretation, particularly in complex contractual or regulatory contexts. PropCo administrators must navigate these linguistic nuances to ensure accurate interpretation and implementation.

Benefits of Outsourcing Real Estate Administration

1. Specialized Regulatory Expertise

Outsourcing PropCo administration gives you access to jurisdiction-specific expertise that would be painfully expensive to build in-house. Professional administrators have teams who know the ins and outs of multiple European jurisdictions, helping you navigate complex regulatory landscapes with confidence.

This expertise significantly cuts your compliance risk. With professionals keeping a watchful eye on regulatory changes across European markets, you’re less likely to face penalties or operational hiccups due to compliance oversights.

2. Real Estate-Specific Knowledge

Professional administrators excel at turning complex asset performance data into meaningful accounting metrics. They understand both the operational realities of real estate and the accounting principles needed to report accurately.

They’re also invaluable for transaction management. Their deep knowledge of real estate deals—from structuring acquisitions to planning dispositions—means more efficient transactions and better tax positioning.

Perhaps most importantly, they provide strategic financial insights that transform administrative work from a cost burden into a value driver, helping investment managers spot opportunities that might otherwise go unnoticed.

3. Data Quality and Reporting Enhancements

Third-party fund administration providers bring consistency to your data. Their standardized collection processes across different property types and jurisdictions ensure reliable information for meaningful portfolio analysis.

You’ll gain deeper performance insights, too. With their market experience and specialised tools, administrators uncover hidden performance drivers and improvement opportunities. Better data leads to smarter decisions.

4. Cost Efficiency Benefits

Outsourcing slashes administrative overhead. No need to build and maintain specialist teams across multiple jurisdictions. It’s a fixed-cost reduction that matters.

Professional administrators deliver higher quality at lower cost. They leverage economies of scale and specialized expertise across multiple clients efficiently. But the biggest win is that investment managers can refocus on what truly matters: deal sourcing, investment strategy, and investor relations.

5. Scalability Advantages

Professional administrators adapt seamlessly to changing portfolio sizes and compositions—crucial in dynamic investment environments where portfolios shift through acquisitions and dispositions.

As your portfolio grows, complexity doesn’t mean proportionally higher costs. This scalability gives outsourcing a significant edge over in-house functions, which typically require substantial resource increases to handle growth. Your administrative support grows with you, without the growing pains.

Conclusion

Managing European real estate entities presents significant challenges due to complex regulations, accounting practices, and cross-border coordination requirements.

Outsourcing administration to experienced real estate fund service providers delivers critical advantages in compliance expertise, operational efficiency, and scalability. By partnering with a professional administrator, investment managers can free resources to focus on deal origination, portfolio strategy, and value creation.

As the European real estate market evolves, effective PropCo administration becomes increasingly important as a competitive differentiator. Investment managers who recognize this function’s strategic importance will be better positioned to navigate complexities, optimize structures, and deliver superior investor value in this challenging sector.

For asset managers, audit season is more than a routine compliance exercise—it is a critical period where operational precision, regulatory adherence, and investor transparency are all under the microscope. Even well-run funds can feel pressure during this time: schedules tighten, audit teams request detailed reconciliations, and reporting must be flawless across multiple fund structures and geographies.

For managers working with fund administrators who take a tech-first, low-touch approach, these challenges are magnified. While technology can streamline reporting and data aggregation, it cannot on its own replace proactive, hands-on guidance. Additionally, administrators with low or varying service quality may struggle to scale up or adapt to clients’ changing needs, further complicating the audit process.

The most common stress points exacerbated by a lack of high-touch support include:

Delayed responses to audit inquiries: Solely tech-driven platforms often prioritize automated workflows over real-time human support. When auditors raise questions—whether about NAV adjustments, intercompany transactions, or fee calculations—delays in response can cascade into last-minute escalations.
Limited visibility into complex structures: Private funds often have multi-class shares, co-invest vehicles, or feeder funds spanning multiple jurisdictions. Without a dedicated team that understands these nuances, managers risk receiving incomplete or confusing reports, increasing the potential for audit findings or rework.
Incomplete reconciliations: Automated reporting can handle standard positions and cash flows, but unusual transactions—such as NAV loans, secondary trades, or FX adjustments—require expert judgment. Low-touch models can miss these, leaving managers responsible for manual corrections under tight deadlines.
Reactive problem-solving: Tech-first providers often wait for issues to surface before addressing them. In contrast, high-touch administrators anticipate anomalies—spotting missing documents, reconciling prior period adjustments, and preparing schedules proactively to minimize disruption.
Pressure on internal teams: When administrators are unavailable or lack deep operational knowledge, fund teams must shoulder the burden—preparing reconciliations, chasing auditors, and addressing exceptions—diverting time from strategy and investor engagement.

Managing risk

A high-touch fund administration model mitigates these risks. Dedicated teams with deep operational knowledge and experience across fund structures:

Serve as a single point of contact for audit and regulatory queries, ensuring timely, accurate responses.
Prepare detailed pre-audit schedules, including cash reconciliations, capital call and distribution statements, and third-party confirmations, as an integral part of our service delivery—without additional costs or requests. This high-touch service is embedded directly into our offering, ensuring that clients receive the support they need without added stress.
Coordinate across custodians, prime brokers, and portfolio managers to reconcile positions and verify valuations.
Anticipate unusual or complex items, such as subscription line loans, multi-jurisdictional tax considerations, or NAV adjustments for illiquid assets, reducing last-minute surprises.
Provide transparent, customizable reporting tailored to the needs of auditors, investors, and internal management.

Ultimately, the difference between a stressful audit and a smoothly managed one comes down to the support model. Technology is essential, but human expertise, proactive guidance, and a relationship-driven approach ensure accuracy, efficiency, and peace of mind.

At Alter Domus, we combine leading-edge operational platforms with white-glove service. By integrating technology with hands-on support, we help asset managers navigate audit season confidently reducing risk, freeing internal resources, and delivering the reliability that investors and auditors demand.

In the dynamic landscape of private markets, every General Partner (GP) has unique operational needs and preferences. At Alter Domus, we understand that a one-size-fits-all model simply doesn’t work. Instead, we adopt a consultative approach, collaborating with each client to define a co-sourcing strategy that aligns with their specific requirements.

Whether it’s supporting a single process like Form PF reporting or managing full fund accounting cycles within the client’s infrastructure, our flexibility ensures that we meet diverse operational contexts.

Here are some examples of how we empower GPs through customized services and expertise:

Typical Capabilities Include:

Fund Accounting: We prepare books and records using the client’s technology platform, with workflows designed for dual review and sign-off.
Capital Activity: We calculate and format capital calls, distributions, and notices, while clients retain approval rights and manage LP communications.
Regulatory Reporting: Our teams collect, map, and format data to comply with evolving requirements.

By partnering with us, internal GP teams can concentrate on oversight and strategy, while our dedicated professionals manage execution within a clearly defined control framework.

Making the Shift: Practical Considerations:

Transitioning to a co-sourcing model doesn’t mean overhauling existing systems or starting from scratch. With years of implementation experience, we guide clients through a structured transition focused on clarity, integration, and flexibility.

Through our extensive work with clients, we’ve identified three key building blocks essential for unlocking the full potential of a co-sourced operating model:

1. Define the right scope: We pinpoint operational areas under pressure, such as:

Fund closings and reconciliations
Capital statements and investor notices
Data preparation for regulatory reporting
Waterfall modeling and fee calculations

2. Maintain System Continuity: Clients keep their platforms while we securely integrate into their ecosystem, ensuring a single source of truth and avoiding fragmentation.

3. Establish Strong Governance: We align with each client’s compliance and oversight model, ensuring clear roles, documentation, and audit trails. Managers retain ultimate responsibility, while our teams execute defined workflows according to agreed service-level agreements (SLAs).

Figure 1 – The Benefits of Co-Sourcing with Alter Domus

Benefit	How it Helps
Internal Oversight	Control over systems, data, policies, and approval processes remains in-house
External Execution	Alter Domus executes defined tasks at scale, with speed, accuracy, and rigor
Data Ownership	Clients maintain full ownership of their infrastructure and data environment
Regulatory Readiness	Respond to changing rules with agile support and specialist knowledge.
Investor Responsiveness	Meet LP reporting demands faster and more consistently.
Operational Scalability	Expand or contract support without internal hiring constraints.
Access to Talent	Tap into deep experience across private equity, private credit, and real assets

Co-Sourcing: A Model for Long-Term Resilience

For private markets managers, operational resilience transcends mere business continuity; it’s about forging systems and partnerships that can adapt and thrive in an increasingly complex environment. Co-sourcing provides the perfect balance: the stability of internal oversight combined with the executional strength of a specialist partner.

At Alter Domus, we view co-sourcing as a strategic decision rather than just a service model. It empowers asset managers to focus on what truly matters: creating value for investors, meeting regulatory expectations, and growing with confidence.

If you’re reevaluating your operating model or exploring how co-sourcing could enhance your structure, we’re here to assist. Alter Domus has extensive experience supporting transitions of all sizes and complexities—whether you’re managing a single strategy or adding new strategies.

Securitisation has become an indispensable tool for institutions, asset managers, and asset owners. This sophisticated financial instrument offers a powerful trifecta: effective risk management, enhanced liquidity, and streamlined capital structures.

For those contemplating the incorporation of a securitisation vehicle, a comprehensive grasp of this intricate yet potentially lucrative process is crucial. By mastering its complexities, you’ll gain the confidence to navigate challenges adeptly and fully harness the myriad benefits securitisation offers, positioning yourself at the forefront of modern financial strategy.

What is Securitisation and why is important?

Securitisation is the process of pooling various types of financial assets, such as loans, mortgages, or receivables, and converting them into marketable securities. These securities are then sold to investors, allowing the originators to free up capital and manage risk more effectively. The cash flows generated from the underlying assets are used to pay interest and principal to the investors.

During 2017 and 2018, the European Union set up rules for securitisations. The goal was to bring the EU securitisation market back to life while also addressing worries about risky practices that had threatened stability after the global financial crisis of 2008. Since it entered into force in 2019-2020, the framework has strengthened investor protection, transparency, and financial stability.¹

The European Commission has recently taken steps to revitalize the EU’s securitisation framework to make it simpler, more effective, and supportive of economic growth. These initiatives are part of the savings and investments union strategy, which focuses on improving the way the EU financial system works to boost investment and economic growth across Europe.

Benefits of Securitisation

Enhanced Liquidity

By converting illiquid assets into tradable securities, institutions and originators can access capital markets and improve their liquidity position. This transformation allows entities to free up resources that can be used for further lending to EU citizens and enterprises.

Risk Management

Securitisation allows for the transfer of risk from the originator to investors, which can help in managing credit risk and regulatory capital requirements. The main goal is to enable banks and other financial institutions to use the loans and debts they grant or hold, pool them together, and turn them into different types of securities that investors can purchase.

Cost Efficiency

Securitisation can lead to lower funding costs compared to traditional financing methods, as it often allows for better pricing based on the risk profile of the underlying assets. Recent EU reforms aim to simplify unnecessarily burdensome requirements and reduce costs to encourage more securitisation activity.

Diversification of Funding Sources

By tapping into the capital markets, institutions can diversify their funding sources and reduce reliance on bank financing. This diversification is particularly important in today’s volatile economic environment.

Regulatory Benefits

In some jurisdictions, securitisation can provide regulatory capital relief, allowing institutions to optimize their balance sheets. The European Commission’s recent proposals have estimated a reduction in capital requirements by one-third for senior securitisation tranches, which should encourage new issuances in member states where activity has been limited.

Key Considerations before incorporating a Securitisation Vehicle

The European securitisation market operates under the EU Securitisation Regulation (EUSR), introduced in January 2019 as part of a comprehensive regulatory response to the Global Financial Crisis.

The Securitisation Regulation amendments aim to reduce operational burdens by simplifying transparency requirements, with plans to cut reporting fields by at least 35%. The revisions introduce more proportionate, principle-based due diligence processes, eliminating redundant verification steps when the selling party is EU-based and supervised.

Notably, the requirement for Simple, Transparent and Standardised (STS) securitisations has been modified to consider pools containing 70% SME loans as homogeneous, facilitating cross-border transactions and enhancing SME financing opportunities.²

Choosing the right jurisdiction

Selecting the appropriate jurisdiction for your securitisation vehicle is a critical strategic decision that impacts regulatory compliance, tax efficiency, and operational flexibility. Several European jurisdictions offer competitive frameworks for securitisation vehicles, each with distinct advantages depending on your specific transaction objectives.

The optimal jurisdiction ultimately depends on multiple factors: the location and type of underlying assets, your investor base, anticipated transaction complexity, and specific business objectives. Regulatory changes, such as the EU Securitisation Regulation, have created a more harmonized framework across Europe, though important jurisdictional nuances remain that can significantly impact transaction efficiency.

Structuring the vehicle

Decide on the structure of the securitisation vehicle. Common structures includes:

Securitisation Undertaking: A corporate entity specifically designed for securitisation transactions
Securitisation Fund: Similar to an investment fund, but specifically for securitisation assets
Fiduciary Structures: Where assets are held by a fiduciary for the benefit of investors

These structures are designed to isolate financial risk and facilitate the issuance of securities. You can choose a bankruptcy-remote structure with a Dutch Stichting or a Jersey Trust, which are most commonly used, or incorporate a vehicle using an entity in your group.

Legal & Tax Implications

You’ve made the strategic decision to incorporate a securitisation vehicle—now it’s time to navigate the complex legal and tax landscape that comes with it. Have you considered how different jurisdictional choices might impact your bottom line?

Legal and tax considerations aren’t just compliance checkboxes. They’re powerful levers that can dramatically enhance your securitisation structure’s efficiency. Engaging specialized advisors early in your planning process to avoid costly restructuring later.

By strategically selecting your jurisdiction and structure based on your specific assets and investor profile, you can create a tax-efficient vehicle that maximizes returns while maintaining full compliance.

Servicing and Management

Establish a reliable servicing and management framework for the transaction. Effective management and administration of the vehicle by an experienced partner is critical to ensure the correct execution of the transaction.

As the legislative changes removed restrictions on leverage and the nature of the securities permitted as collateral, the SV can now enter into a facility with a credit institution. This is required to acquire the full amount of the contemplated investments, providing greater certainty to the market.

Conclusion

Incorporating a securitisation vehicle represents a strategic opportunity for financial institutions and asset managers seeking to optimize their capital structures, enhance liquidity, and manage risk effectively. The European securitisation market, with its evolving regulatory framework, offers sophisticated mechanisms to achieve these objectives when properly structured.

Partnering with an experienced service provider gives you access to specialized knowledge from structuring and incorporation to efficient implementation and execution to vehicle liquidation.

This collaboration enables you to navigate jurisdictional complexities with confidence, ensure regulatory compliance across borders, and optimize your structure for maximum efficiency and investor appeal. Such expertise has become not merely beneficial but essential for institutions seeking to leverage the full potential of securitisation.

Securitisation is complex and you shouldn’t have to manage it alone. At Alter Domus, we simplify the process with end-to-end expertise, from transaction closing through administration and up to liquidation. With us as your partner, you can focus on strategy and investors while we take care of execution.

Contact us today to learn about how you can unlock of the full potential of securitisation with Alter Domus.

Strategic chess pieces symbolizing investor considerations in syndicated loan and private credit decisions.

Data centers and renewable energy have emerged as two of the fastest growing sub-sectors within the infrastructure asset class.

The digitalization the economy and the transformative impact of generative AI on society and business has seen a surge in demand for data, which is forecast to climb from just two zettabytes in 2010 to 2142 zettabytes by 2035, according to CBRE Investment Management analysis.

The exponential increase in data demand has in turn driven unprecedented levels of investment and growth in the data center market. According to Blackrock the data center market is expanding at a compound annual growth rate of 22 percent and will reach 291 GW by 2030, while data center M&A reached an all-time high of $73 billion in 2024, according to Synergy Research.

Growth in renewable energy market, meanwhile, has been spurred by initiatives to reduce carbon emissions, strengthen energy security, and transition the global energy system off hydrocarbons in order to mitigate the risks of climate change. According to the International Energy Agency (IEA), the ratio of clean power to investment to hydrocarbon investment has increased from 2:1 in 2015 to 10:1 in 2024, with global renewable energy capacity expected to expand by 2.7 times by 2030.

Changing the face of infrastructure

The growth of data centers and renewables reflects the changing way investors and dealmakers are thinking about infrastructure, driven by evolving infrastructure trends that emphasize sustainability and long-term value.

Traditionally infrastructure has been defined as an asset class focused on “hard” assets in the built environment, like roads, railways, and utilities, but the combination of rapid advances in digital technology, growing sensitivity to climate change risk and increasing electric vehicle use, is reframing how governments, investors and consumers think about essential services.

These megatrends are broadening out the scope for where and how infrastructure funds invest, with Goldman Sachs Asset Management noting that there is more scope for infrastructure funds to invest in assets with a wider variety of risk profiles, at different points in their development cycle.

The emergence of data centers and renewables in the infrastructure mix are illustrative of how infrastructure has expanded beyond its core and core-plus base, where investors target classic, mature assets with long-term contracted revenues that deliver steady yields, into value-add infrastructure, where assets require investment and enhancements; and opportunistic infrastructure, where investors will take on construction and development risk.

Data centers and renewables can straddle the full infrastructure risk curve, with managers either targeting the steady yields on offer from established renewable energy and data center assets characterized by contracted revenue streams and inelastic demand, all the way through to higher returning value-add and opportunistic plays, where infrastructure investors will either digitalize and decarbonize existing assets, or finance the construction of new data centers, wind and solar farms.

Data centers and renewables do present the key infrastructure investment characteristics (defensive, predictable cashflows and returns with a low correlation to market cycles and other asset classes), but in different shades.

This means that the lines between infrastructure and other asset classes, such as real estate, can often blur and overlap.

Data centers, for example, provide an essential service, and have high barriers to entry and have long-term contracts, which puts them squarely in the infrastructure bucket; but also exhibit real estate characteristics, as they will usually be leased to third-parties and their relative attractiveness will be determined by location, access to utilities, and permitting sign-offs, according to CBRE Investment Management.

For investors and dealmakers, it is important to have an investment framework in place that is flexible and can accommodate any natural overlaps between infrastructure and other asset class, but also precise enough to avoid strategy drift.

Intertwined fortunes

As the data center and renewables asset classes continue to evolve and expand, their progression will become increasingly intertwined.

The single biggest bottleneck to meeting data center demand will be access to power. Data centers are heavily power consumptive. In the US, for example, data centers currently account for 2.5 percent of total US electricity consumption, and close to a fifth of power generation in Northern Virginia, where around half of the US’s data center infrastructure is located, according to CBRE Investment Management. By 2023 data centers could account for 7.5 percent of US electricity consumption.

Linking data center assets up to the power grid, however, is complex process, with timelines for securing permits and adding to grid capacity running from anywhere between 5 and fifteen years.

Grid bottlenecks can pitch data center developers against other, as new renewable energy assets are also faced with long lead times and delays to secure access. CBRE Investment Management notes that in the US alone close to 1,600 gigawatts of electricity generation capacity – mainly from wind, solar and storage – is awaiting the regulatory green light to access the power grid.

But while data centers and renewable may be scrambling against each other for scarce grid access in some cases, there is also growing cooperation between the two assets classes to meet their respective requirements.

Data center users, for example, are working with renewable energy providers to offset emissions from their energy intensive operations. Bringing on additional renewable power capacity will be crucial for data center growth.

According toMcKinsey, hyperscale data center operators are among the biggest backers of 24-7 renewable energy power purchase agreements (PPAs) (where energy users commit every hour of electricity consumption with hydrocarbon free generation) with these PPAs filling the gap left by government-backed subsidies and tax credits that funded the roll-out of renewable energy projects, but have gradually been rolled back as renewable energy has matured and become more competitive with hydrocarbon power generation on price.

Google, for example, plans to purchase clean energy 24 hours a day on every grid it draws power from. In 2024, for example, the technology giant signed up to its largest PPA deal ever, buying up 470MW of offshore win capacity to power its Dutch operations. Microsoft has agreed a similar deal in Sweden, while Amazon is now one of the single biggest corporate buyers of renewable energy in the world, backing over 500 projects with annual generation capacity of 77,000 GwH, according to Data Center Dynamics.

For renewable energy project developers, the strong demand from data centers for clean energy ensures that they have a ready-baked market for their output, with PPA deals securing long-term contracted revenues at a set price for all their energy production.

PPA deals, however, are not only a way for data centers to offset fossil fuel power consumption. Data centers and renewables providers are also developing new models to supply clean energy to data centers directly.

Data Power Optimization (DPO), for example, focuses on aligning the location of data centers with so-called “stranded” renewables assets in remote ocean and desert locations, where there is plenty of wind and sun, but it is difficult to transmit this energy to populous urban areas where its required.

Matching up these locations with data centers solves for the grid access issues a data center may encounter, as well as given the data center direct access to clean energy, while ensuring that the renewable energy provider has a buyer for its production.

Indeed, Data Center Dynamics reports that technology companies are teaming up earlier with renewable energy developers earlier in the development of renewable energy projects to secure long-term energy supply deals for their data centers directly. As demand energy-hungry data centers continues on its upward trajectory, renewables power provision will be a crucial lever for meeting this energy ask. Infrastructure investors targeting one of these asset classes will find that its long-term progress is becoming inextricably linked with the other.

Global demand for infrastructure is skyrocketing and governments around the world are struggling to keep pace.

The world’s population, estimated at around 8 billion, has more than tripled since 1950 and is forecast to increase by more than 20 percent by 2025, according to the United Nations. This has driven up demand for more provision of electricity, transport, water and sanitation and telecommunications.

In addition to the pressure for additional core infrastructure capacity to come onstream to support a growing population, there is also growing demand for investment in new areas, including digital, renewables and decarbonization. Ageing infrastructure also requires capital for urgent upgrades and maintenance, usage of existing assets increases in line with rising populations.

A widening fund gap

It has become increasingly difficult for governments – who have had to rein in spending after pandemic financing stimulus and in the face of rising borrowing costs – to keep up with the accelerating demand, as required investment outstrips available public resources.

According to The G20 Global Infrastructure Hub initiative, current levels of investment in infrastructure will not be enough to meet long-term demand, with $15 trillion investment gap opening by 2040 if investment doesn’t increase materially.

If governments do not make the necessary investment to fix, upgrade and build new infrastructure, the costs to economies and societies will be immense, with impacts on domestic and cross-border trade, economic competitiveness, consumers and the environment.

Governments will remain ultimately responsible for infrastructure development, but will have to work with private sector capital providers to finance the build of new projects and operate and maintain existing assets.

The investment case for private markets

The urgent requirement for governments to up infrastructure investment align with the commercial objectives of private markets fund managers, who can invest in infrastructure on a sound commercial basis at the same time as serving a wider societal objective.

The solid long-term fundamentals that underpin infrastructure demand, and the stable contracted revenue streams tied to infrastructure assets, have drawn more and more capital into private infrastructure funds during the last 15 years.

Infrastructure assets under management (AUM) have expanded at a compound rate of 16 percent since 2010 and now exceed US$1 trillion, according to Preqin figures. By 2026 AUM could exceed US$1.8 trillion.

The levels of infrastructure AUM relative to the forecast 2040 US$15 trillion infrastructure funding gap suggests that their a is still a long runaway of growth ahead for infrastructure funds, and clear incentive for the public sector to funnel this capital into infrastructure projects.

Bringing in the private sector

Bringing in private capital to finance the construction of new infrastructure can be facilitated through the range procurement channels and public-private-partnerships (PPPs), where the private and public sector share the risk and capital expenditure burden of construction new assets. Private sector operators can also back existing infrastructure assets, investing in the ongoing provision and maintenance of services.

Funding core infrastructure operations and build-out with private sector capital, however, is not a silver bullet that will magic away the widening infrastructure funding gap and eliminates financial risk and delay on infrastructure projects

There have been high profile examples of PPP deals. for example, that have been hit by long delays and large cost overruns, such as the California High-Speed Rail project in the US and the Sydney light rail development in Australia. Direct private ownership of infrastructure assets has not always worked either.

Projects run only by the public sector, however, have also been subject to prolonged timelines and mushrooming budgets, and there is a body of research showing that in the round, PPP projects offer better value for money than vanilla government procurement.

In addition, G20 Global Infrastructure Hub analysis shows that the increase in capital flows into private infrastructure funds has translated into more investment. Private investment in infrastructure does not come without its risk, but with the infrastructure gap widening every year, the requirement to accelerate private investment is becoming ever more pressing.

In it for the long-haul

From an investor and private funds manager perspective, while infrastructure does offer protection against downside risks, there will be points in the cycle when wider macro-economic and geopolitical and even infrastructure trends impact deployment and fundraising opportunities.

Interest rate dislocation during the last 36 months, for example, has taken a toll on infrastructure fundraising, which has declined for the last three years, falling to a decade low in 2024.

Deployment can also prove challenging, through all points in the cycle. Competition for a limited pool of existing assets, with bankable, established cashflows is intensifying and high valuations on entry can make it tough for managers to meet investor return expectations.

The Global Infrastructure Hub, meanwhile, notes that sourcing suitable greenfield projects is also difficult given the risk that comes with backing these projects. The highest share of uninvested infrastructure dry powder is held by managers who are targeting greenfield projects exclusively.

If governments want to draw more private capital into funding infrastructure, preparing a longer pipeline of bankable investment opportunities will be essential.

Even entirely privately funded infrastructure projects involve close coordination with government agencies to cover of planning permissions and permitting. According to the World Bank project preparation can take between 24 and 30 months and absorb between five and 10 percent of total project investment before ground is even broken.

When crowding in private capital governments also have to ensure that risk is allocated sensibly between the private and public sector. Private investment in infrastructure is not sustainable if managers are seen to be taking excessive profits from building and running public assets without taking on any risk, but at the same time private markets players won’t have the balance sheets or capacity to bear all the risk of large projects entirely in isolation. Rigorous planning, structuring and negotiation is necessary to strike this fine balance.

Governments that expedite pre-project planning and permitting work and take a balanced approach to risk sharing, will have a deeper pool of bankable projects for private funds managers to back, and be in the front of the queue to attract more private investment.

Demand for infrastructure, across all geographies and all categories, is not slowing down. private markets managers have the potential to generate excellent returns when serving that demand. Governments should be ready to help them every step of the way.

During the last decade private infrastructure has grown from an esoteric asset class on the periphery of the private markets ecosystem into a mainstay of alternative asset portfolios.

In 2010 infrastructure assets under management (AUM) only totaled less than US$170 billion, according to Preqin figures, but during the following decade infrastructure AUM have grown at an annual compound rate of 16 percent and now exceed US$1 trillion.

The steady long-term cashflows and relative low volatility that characterize the asset class have made infrastructure one of the fastest growing areas of private market.

The strategy, of course, hasn’t been immune from the wider headwinds that have faced private markets through the recent interest rate rising cycle. Infrastructure fundraising has declined for three years in a row, falling to the lowest levels in a decade in 2024.

Over the long-term horizon, however, infrastructure remains a highly attractive investment strategy for pension and sovereign wealth funds that want to diversify their private markets portfolios and build exposure to assets that offer inflation protection and stable, uncorrelated investment returns.

Even as AUM have skyrocketed, many investors are still under-allocated to infrastructure, with a survey of more than 100 investors in 20 countries by Cornell University’s Program in Infrastructure Policy and advisory firm Hodes Weill Associates found the almost two thirds of public and private pension funds said they were under-allocated to infrastructure, while global institutions, on average, reported being 1.23 percent below targeted allocations.

After a challenging 36 months, prospects for fundraising are looking up, demonstrating long-term investor appetite for exposure to the asset class.

Infrastructure Investor estimates that the ten largest funds in the market will seek to raise more than US$143.63 billion between them alone during the next year, while asset manager Schroders sees fundraising rebounding back in line with historical patterns.

With the private infrastructure industry set for a period of sustained growth, Alter Domus provides a detailed breakdown the attributes that make infrastructure such an attractive investment strategy for long-term institutional investors.

1. Assets with predictable cash-flows

Infrastructure assets, such utilities, transport networks, schools and hospitals, provide essential services funded by non-discretionary spending, with demand sustained across investment cycles.

As providers of essential services, infrastructure assets and operators benefit from long-term financing arrangements fixed contractable revenues, often running for 10 years or more and supported by government guarantees.

The fact that infrastructure provides non-discretionary services makes it easier to pass on high-costs to end users, and many contracts will have inflation-adjustment mechanism provisions, offering a shield against inflation on margins.

Analysis from KKR shows that in cycles of high inflation, infrastructure assets provide superior real returns to equities and real estate.

2. Returns with low correlation to other asset classes

Infrastructure will typically produce returns that have low correlation with other asset such as equities and fixed income. This offers investors attractive diversification benefits, as well as steady revenues and yields through downcycles. This long-term investment horizon aligns closely with infrastructure trends that emphasize durability, resilience, and stable returns.

Hamilton Lane analysis shows that the pooled one-year IRR for global infrastructure over the last ten vintage years, has come in at 12.5 percent, and when looking at the highest and lowest 5-year annualized performance periods over the last 20 years, investors in infrastructure avoided the drop off on performance observed in other asset classes.

3. Returns with low correlation to other asset classes

Infrastructure assets will typically have long life spans, making illiquid private markets funds are good structure for holding these assets.

For pension funds, insurers and sovereign wealth funds that have to meet long-term financial liabilities the long hold periods for infrastructure assets (HarbourVest estimates that core infrastructures assets can have asset lives in excess of 100 years) are a good option for matching liabilities with assets to ensure they meet their investment obligations.

4. Solid underlying growth fundamentals

A confluence of global megatrends is driving up demand for infrastructure investment across all areas. There is a long growth runway ahead for infrastructure investors, driven by multiple factors:

The world’s population has more than tripled since the 1950s, according to the United Nations, driving up demand for energy, transport, water and sanitation and telecoms.
The world is more urbanized. More than half of the global population now lives in urban areas – up from a third in 1950, according to the UN. The drives particularly intense demand for ongoing infrastructure investment in concentrated areas
Decarbonization will require existing infrastructure to be retrofitted to reduce energy and emissions, as well as investment in new infrastructure to facilitate the use of renewable energy, as well as battery storage and charging infrastructure to support the switch to electric vehicles.
The digitalization of the economy, cloud computing and the rise of AI are driving huge increase in demand for investment in data center capacity. According to BlackRock, data center capacity will have to expand at a compound annual growth rate of 22 percent to meet projected demand.
There is an urgent requirement to upgrading aging infrastructure. According to the American Society of Civil Engineers failure to upgrade existing assets could cost the US economy up to US$4 trillion GDP between 2016 and 2025.

5. Partnering with government to deliver infrastructure

Government budgets are stretched following the pandemic period, especially as borrowing costs have gone up. It will be difficult for governments to meet infrastructure investment requirements without private capital.

Partnering with governments using structures like public-private-partnerships (PPPs), where the private and public sector share the risk and capital expenditure burden of construction new assets, opens opportunities for the private sector to support the build of new infrastructure projects in return for access to stable revenue streams and the appreciation of underlying asset values.

PPPs are designed to share risk between the state and private sector, making it easier for private infrastructure players to invest than taking on greenfield projects without the support of the state.

6. A pathway to meeting ESG obligations

Almost all institutions will be obligated to meet environmental, social and governance (ESG) goals as part of their investment mandates.

Infrastructure assets are well-positioned to align these ESG goals with financial performance metrics. Investments in clean energy, water sanitation or schools and hospitals all present sound commercial investment opportunities, but also drive visible, positive environmental and social impact.

Risks and challenges

Regulatory risk:
Infrastructure can be impacted by shifts in government and regulatory policy, which can disrupt revenue and funding models, particularly for assets developed in PPP deals.

Political risk:
Some jurisdictions can present political risk and even possible expropriation in some circumstances. Protecting infrastructure assets in unstable regions can erode earnings.

Operational risk:
Infrastructure assets are complex and challenging to build and maintain, which can often lead to delays and cost overruns. Construction consultancy Mace estimates that four in five large infrastructure projects globally experience cost or time overruns, while McKinsey analysis shows that 98 percent of mega projects will exceed budgets by more than 30 percent, with more than three in four of these projects subject to delivery delays of at least 40 percent.

A good fit for institutional investor portfolios

It is important for investor to go into the infrastructure segment with their eyes open to these risks, but equally important to recognize that experienced managers with proven operational expertise will be able to mitigate these risks significantly through due diligence and building up diversified portfolios of infrastructure assets.

For institutional investors the benefits of infrastructure allocations to a portfolio far outweigh the risks. The asset class dovetails tidily with long-term private markets fund structures and presents investors with stable, long-term revenue streams that are insulated against inflation and have low correlation to other investment classes and economic cycles. Infrastructure investment also aligns with ESG objectives

As growing populations drive long-term demand for infrastructure, and with governments unable to meet investment demand without private sector capital, infrastructure will remain a key part of private markets portfolios.

A team of our real estate-focused sales and operational leaders attended IMN’s Winter Forum on Real Estate Opportunity & Private Fund Investing in Laguna Beach, California this past week. Held from January 22-24, 2025, at the Montage Laguna Beach, the conference attracts more than 1,200 attendees and holds an agenda of more than 40 sessions with more than 200 speakers participating, including our own Manager Director Michael Dombai.

While there, we spoke with fellow servicing firms, software providers, and real estate managers of all sizes and niches while also listening in to the expert opinions on the top trends affecting the segment.

What’s clear is that real estate finds itself at an important junction with the new year ahead – whether it’s a new U.S. administration, the still-evolving commercial real estate recovery, or the closely watched interest rate cycle. As a result, there was plenty to discuss with our industry peers over the course of the conference – here are some of the most buzzed-about trends.

1. Fundraising is down

As cited in a speaking session from our valued partner Matt Posthuma at Ropes & Gray, PERE has published that fundraising is down 50% from its peak in 2021, and down around 30% from 2023. Of this shrunken fundraising pool, the largest real estate managers are claiming the lion’s share – a trend we are seeing not only in real estate but across the broader alternative asset landscape.

While fundraising may be tempered, returns and investment values show promising signs of health, as the U.S. real estate sector is forecasted to submit better returns than the public equities market.

2. Interest rates continue to bring uncertainty

When it comes to interest rates, few feel confident enough to make a defining statement on what is to come, particularly with the volatile last five years in mind. However, with a recovered market, vocalized rate cuts by the Federal Reserve, and a likely extension to the U.S. Tax Cuts and Job Act, the broadly held hope is that we will settle into stable period of interest rates.

3. Outsized insurance risk is our new normal

Skyrocketing insurance rates were also heavily discussed – a timely topic given the event’s proximity to the L.A. fires that tragically continue to burn through the metropolitan area. Speakers suggest that while these natural disaster events are often referred to as “once-in-a-lifetime events”, they will transition to our new normal. Insurance rates in high-risk areas are unlikely to return to the past levels we’re accustomed to, and that added cost must be factored into future real estate deals and underwriting processes.

4. All eyes are on the new U.S. administration

As a new U.S. administration entered the White House earlier this week, the industry is on the lookout for changes in regulation, tariffs, geopolitical conflicts and more. The consensus is that impending deregulation could have a favorable effect, but other question marks remain. For example, how could impending tariffs affect the costs of building materials, and how might the possibility of mass deportations affect access to building labor and construction timelines?

Even with the uncertainty of a new administration’s impact on the real estate space, foreign managers and investors have a favorable eye to U.S. real estate exposure due to its strong market recovery in a post-COVID world.

5. Several sectors are producing exciting activity

Activity in the data center niche creates the most excitement. Though they require ample energy to operate, some think we will see a renewed rise in nuclear power plants to power these data centers. Open air shopping centers have also performed well and new opportunities in this niche are attracting healthy deal attention.

Luxury housing conversely has a poor outlook as a sector, even amid high building activity since materials and labor costs to build remain high. At the other end of the spectrum, demand for workforce housing may be at an all-time high, but the real estate investment space isn’t feeling optimistic about the possibility of returns for such projects, which tend to require a private/public partnership.

In all, we had a productive few days rubbing shoulders with some of the brightest minds in the real estate investment space. This new year is certain to hold wins, challenges, and changes, and we’re excited and committed to helping our clients navigate what’s set to be a fascinating 2025.

Ready to talk about your real estate servicing needs for 2025? Reach out to our team here.

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Alternatives power client opportunity

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The barriers we remove for Wealth Managers and Multi-Family Offices

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Navigating the Complexities of European Real Estate Administration

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1. Regulatory Complexity

2. Real Estate Accounting Complexities

3. Asset Diversity Management

4. Property Manager Coordination

5. Cross-Border Reporting Challenges

6. Language and Communications Barriers

Benefits of Outsourcing Real Estate Administration

1. Specialized Regulatory Expertise

2. Real Estate-Specific Knowledge

3. Data Quality and Reporting Enhancements

4. Cost Efficiency Benefits

5. Scalability Advantages

Conclusion

Insights

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Performance and Purpose: How Endowments and Foundations Govern Long-Term Capital

Agency as a First-Order Risk Decision in Private Credit

Audit Season Stress: Why High-Touch Fund Administration Matters

Managing risk

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Performance and Purpose: How Endowments and Foundations Govern Long-Term Capital

Agency as a First-Order Risk Decision in Private Credit

Evolving Operations: The Rise of Co-Sourcing in Private Markets

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Eight Drivers of Co-Sourcing In Private Markets

Co-Sourcing Overview

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When Borders Become Background: Operating Across Jurisdictions

Performance and Purpose: How Endowments and Foundations Govern Long-Term Capital

Agency as a First-Order Risk Decision in Private Credit

Co-Sourcing with Alter Domus: A Custom Approach for General Partners

Typical Capabilities Include:

Making the Shift: Practical Considerations:

Figure 1 – The Benefits of Co-Sourcing with Alter Domus

Co-Sourcing: A Model for Long-Term Resilience

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When Borders Become Background: Operating Across Jurisdictions

Performance and Purpose: How Endowments and Foundations Govern Long-Term Capital

Agency as a First-Order Risk Decision in Private Credit

Looking to incorporate a Securitisation Vehicle? Here’s what you need to know

What is Securitisation and why is important?

Enhanced Liquidity

Risk Management

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Diversification of Funding Sources

Regulatory Benefits

Key Considerations before incorporating a Securitisation Vehicle

Choosing the right jurisdiction

Structuring the vehicle

Legal & Tax Implications

Conclusion

Insights

When Borders Become Background: Operating Across Jurisdictions

Performance and Purpose: How Endowments and Foundations Govern Long-Term Capital

Agency as a First-Order Risk Decision in Private Credit

Broadening horizons: how data centers and renewables are reshaping infrastructure

The barriers we remove for Wealth Managers
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