Investment of $6 trillion required for European infrastructure, with mid-cap strategy being the key to long-term durability, as per DWS.
In a recent emphasis, Harold d'Hauteville, Head of Infrastructure Equity Europe at DWS, underscored the significance of infrastructure investment for Europe's strategic autonomy. With a capital requirement of $6 trillion by 2030 to transform Europe's infrastructure, focusing on energy transition ($5 trillion) and digital transformation ($1 trillion), private equity investors are urged to prioritize European infrastructure investments.
This investment is crucial not only for decarbonization but also to enhance Europe's strategic autonomy by reducing dependency on US technology, Asian manufacturing, and Russian gas imports. The stability and coherence of the European policy environment provide a strong foundation for long-term infrastructure investments, making Europe an attractive market for these private equity investors.
DWS's strategy to capitalize on these opportunities centers on mid-cap infrastructure assets valued below €1 billion. The focus on this segment, with equity tickets between €200 million and €600 million, seeks to balance scalability and strategic impact within sectors such as roads, grids, ports, data centers, and energy systems.
The mid-cap segment is at the core of DWS's infrastructure investment strategy. This approach offers returns that may not be as high as traditional private equity, but provide stability and protection of capital. Infrastructure investment in Europe is seen as a decarbonisation and energy independence investment, with typical holding periods for DWS being five to six years, targeting a two times multiple.
Public transportation tends to perform well in a low economic cycle, making it an attractive sector for investment. DWS integrates infrastructure equity, debt, and listed infrastructure investments across global and regional strategies, aiming to deliver superior performance through diverse risk/return profiles.
The infrastructure sector is viewed as structurally resilient, despite macro headwinds like tariffs and inflation. DWS views investing in European infrastructure as an attractive opportunity for investors, with a pan-European approach, including recent activity in Switzerland, France, and across the Mediterranean.
In addition, DWS prioritizes sectors aligned with structural trends such as energy transition, digitalization, and public transport. A complementary small-cap strategy focuses on early-stage sustainable infrastructure with the goal of growing into mid-cap core-plus at exit. Mid-cap valuations have remained flat over the past decade, while large-cap valuations have increased.
Europe's infrastructure requires a $6 trillion investment by 2030, with a significant portion allocated to energy transition and digital transformation. This mid-cap segment represents close to 90% of all the transactions since 2019 in Europe. Infrastructure private equity provides downside protection and resilience through macroeconomic changes.
In conclusion, DWS's focus on mid-cap infrastructure investments offers a balanced approach to scalability and strategic impact, making it an attractive opportunity for private equity investors seeking stability, protection of capital, and a contribution to Europe's sustainability goals.
- Harold d'Hauteville, Head of Infrastructure Equity Europe at DWS, believes infrastructure investment is crucial for Europe's strategic autonomy, with a capital requirement of $6 trillion by 2030.
- Private equity investors are urged to focus on European infrastructure investments, as over half of this capital is earmarked for energy transition and digital transformation.
- DWS's infrastructure investment strategy prioritizes mid-cap assets valued below €1 billion, with equity tickets between €200 million and €600 million.
- The stable policy environment in Europe makes it an attractive market for private equity investors, while infrastructure investment offers downside protection and resilience through macroeconomic changes.
- Public transportation and sectors aligned with trends like energy transition, digitalization, and public transport are attractive targeted sectors for DWS.
- A complementary small-cap strategy focuses on early-stage sustainable infrastructure, with the goal of transitioning into mid-cap core-plus at exit.
- Mid-cap valuations have remained flat over the past decade, while large-cap valuations have increased, indicating a potentially profitable investment in Europe's infrastructure sector.
