Frans Verhaar: The legacy of the previous cycle

May 5, 2026

_{This column was originally written in Dutch. This is an English translation.}

By Frans Verhaar, Managing Director and Head of Continental Europe at bfinance

Nine out of ten institutional investors worldwide are positive about infrastructure. Half intend to increase their allocation further. This is no passing fad: in our recent survey of around forty major LPs with a combined $4 trillion in assets under management, infrastructure was the only private asset class about which virtually no one had any doubts.

That optimism sounds like a confirmation of the status quo, but it is actually a warning. Because the real question in 2026 will not be about what you add. It will be about what you already have. And the market underlying that portfolio has shifted.

Over the past eighteen months, we have seen the expected return on closed-end infrastructure funds rise by 100 to 200 basis points in our searches. Core funds that entered the market in 2021 with a net return of 8–9% now stand at 10%. Value-add is exceeding 12%. That is not a cosmetic adjustment. It is a revaluation of risk, the cost of capital and the premium that LPs demand for political uncertainty. In the mandates and pacing plans we assess, there is little sign of this yet. That is not prudence. That is overdue maintenance.

Added to this is something that is rarely discussed explicitly in committee meetings. The biggest obstacle to new infrastructure capital in 2026 is not the market, not the fees and not the opportunity spectrum. It is your existing portfolio. A quarter of the LPs in our survey cite internal constraints as the main brake. In other words: the allocation is full, whilst it was once built on return assumptions, geographical preferences and vehicle choices from a different era. The question every CIO should be asking today is: if I didn’t own this today, would I buy it?

For a significant proportion of the existing exposures we assess in mandates, the answer is, quite frankly: no. That doesn’t necessarily mean you have to sell. It does mean, however, that you cannot continue to pretend your portfolio is passively on track.

Part of the problem also lies in something that rarely gets the attention it deserves: how you measure your portfolio in the first place. The most commonly used benchmark in our survey is ‘inflation plus spread’. A third of LPs use it. It is an excellent reporting metric, but a poor steering metric. It tells you how you are performing in absolute terms, not whether your portfolio is taking on the risks for which you want to be compensated in 2026. Anyone who revalues without a suitable benchmark is revaluing in the dark.

You see the same discrepancy in the choices LPs say they make and the portfolios they actually hold. 68% of respondents state they have no formal cap on greenfield investments, whilst in their actual portfolios 74% is predominantly brownfield. 53% prefer mid-cap over large-cap, but many existing allocations are still full of mega-fund exposure from a time when scale was the decisive factor. What you say you want and what you have in your portfolio are worlds apart. That is precisely why revaluation is more urgent than a new commitment.

The counter-argument is well known. Infrastructure is a long-term allocation and your portfolio should be able to withstand that. There is a grain of truth in that. But long term does not mean static, and certainly not untouchable. A mandate drawn up in 2019 with a 7% return target, focused on US utilities and without an explicit geopolitical risk allocation, is no longer the same mandate in 2026. Reality has changed. The question is whether the mandate has too.

The practical implication for a board or investment committee is clear. Re-evaluate what you have before discussing what to add. Assess every existing position against current return, risk and liquidity requirements. Identify where capital is duplicated, missing or allocated to the wrong portfolio. And ask yourself out loud for every position: would I buy this again today? Everyone is optimistic about the next cycle. The question is who will close out the previous one.