Private Capital Perspectives: Why infrastructure debt is a “real diversifier”
Jerome Neyroud explores how infrastructure debt can offer investors genuine diversification, resilient cashflows and exposure to long-term structural trends.
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As the private credit landscape evolves, investors are increasingly looking beyond traditional corporate direct lending for additional sources of income with the potential to enhance portfolio diversification and resilience.
That was one of the key themes explored by Jerome Neyroud, Head of Infrastructure Debt at Schroders Capital, in the first episode of our Private Capital Perspectives video interview series with investment leaders across our $114 billion private markets platform.
Jerome discusses the role infrastructure debt can play as a complement to traditional private credit allocations, and why, in his words, it is a “real diversifier”.
“How infrastructure debt moves or behaves in a credit cycle is very different to what you would expect from corporate direct lending. In a nutshell, infrastructure debt is immune to the business cycle and is more prone to long-term secular trends. Therefore, you may imagine that the business risks of those two sectors are very different and uncorrelated.”
He argues that the distinction goes beyond the underlying credit exposure. Infrastructure debt provides exposure to essential assets and services, often backed by contracted or regulated revenues. This can provide resilient cashflows, stable credit profiles and downside protection, while diversifying traditional corporate credit exposure.
Key topics covered through the discussion included:
- The expanding opportunity in sub-investment-grade infrastructure debt, offering investors access to a broader range of shorter-duration, resilient return opportunities
- Why there is a huge opportunity in the European infrastructure debt mid-market, which offers distinct scope for alpha generation through specialist origination and structuring, particularly where financing is less commoditised and competition lower
- The importance of underwriting discipline in fast-growing sectors such as data centres, where investors need to distinguish essential infrastructure from technology or merchant risk
- Why specialist expertise becomes increasingly important as more capital enters infrastructure debt
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