April 01, 2025

Beyond diversifying stock and bond holdings, incorporating alternative assets in your portfolios – such as hedge strategies, real estate and infrastructure – allows for less correlation to traditional investments, and offers the possibility of improving returns. For example, adding infrastructure as an asset class has the potential to lower the volatility of a balanced portfolio by limiting exposure to economic cycles while providing partial protection against inflation (as certain revenues are linked to consumer price inflation); generating stable cash flow and long-term capital growth. 

What constitutes an infrastructure asset?

Infrastructure generally refers to any real asset that provides an essential service to the economy, and which has an entrenched or protected market position for an extended period. Infrastructure assets typically exhibit several key characteristics​. They are long-term, capital-intensive assets with high barriers to entry. They often have regulated or contracted revenues that offer stable and predictable cash flows (typically linked to inflation). And they are ordinarily illiquid assets, which can take some time to disinvest from, and which could therefore pose a challenge for certain investors. To qualified investors with a medium-high risk profile, these traits present an attractive value proposition as an income-generating alternative to low-yielding fixed income assets, offering strong downside protection, positive risk/return characteristics, and effective diversification in a traditional balanced portfolio. 

Diverse portfolio of infrastructure assets

The Private Client Infrastructure Portfolio holds over $7 billion in assets under management in over 100 individual infrastructure projects in Canada and other creditworthy jurisdictions. We invest directly in high-quality, mid-sized infrastructure projects with long-term capital growth and/or stable cash flow characteristics. We invest in both traditional infrastructure assets (including rail, student transportation, roads, and hospitals) and renewable energy infrastructure assets (such as wind, solar, and hydro power generation projects). Our portfolio's average investment size is approximately $150 million per project, and average project values are generally under $1 billion. 

Case study: Northside student housing

While infrastructure assets can vary by sector and type, what they have in common is the essential nature of the services they provide. Whether it be power generation from a wind farm or freight movement through a rail terminal, infrastructure assets are critical to their respective industry.  

Another example is student housing, which provides an essential service to the higher education sector, as universities depend on adequate housing capacity to attract and retain students. In December 2024, we acquired a majority stake in the Northside student housing project (Northside) at the University of Texas at Dallas (UTD). 

At UTD, an estimated 25,000 students require housing annually, outpacing available supply by four to five times. Recognizing this gap, UTD procured Northside as a form of public-private partnership to help meet growing demand. 

Northside is located on the UTD campus and operates under long-term land leases with the university. With limited developable land available near campus, Northside is well-positioned to benefit from rising enrollment, while facing minimal competitive threats from new market entrants. 

Northside has a valuable relationship with UTD that helps align long-term interests. UTD sees Northside as an important part of the campus community and has a direct revenue sharing agreement, incentivizing UTD to support Northside’s long term financial success.  Strong pricing power (due to its prime location and student-oriented amenities) also gives Northside a greater ability to pass through cost increases to tenants, creating a natural inflation hedge and protecting future cash flows. 

Our investment in Northside offers a stable, inflation-protected cash flow profile, and an insulated market position with a long-term investment focus. This investment marks our first in student housing infrastructure, further diversifying our infrastructure portfolio.  

The benefit of direct investment in alternative assets

Direct investment in alternative assets via pooled funds is how large institutions typically choose to invest. Direct investment offers the full diversification benefits associated with alternative assets—unlike buying publicly-traded vehicles such as real estate investment trusts (REITs), exchange-traded funds (ETFs) or other mutual funds that offer proxy access, which are all more closely correlated to stock market movements. 

We offer clients the ability to invest in alternative assets, an opportunity historically available only to large institutional investors, such as pension funds. Our alternative investment portfolios provide direct ownership of the underlying assets, like student housing or solar power farms, which makes them a good proposition for the qualified investor.  

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