When fundraising in the infrastructure world was easier, perhaps it was simple to focus on LPs in the institutional world, who often have decades-long, liability-matching timelines, and to ignore the growing demand for liquidity in other pockets of capital.

Nowadays – after two quarters of one of the worst fundraising periods in the asset class’s history – that vision of infrastructure is becoming more difficult to uphold, closing off capital from an ever-growing pool of interested high-net-worth individuals and retail investors.

The tension between assets’ long lives – some of which can be held in quasi-perpetuity – and different investors’ liquidity needs did not, of course, surface with the fundraising crisis of 2023. There were signs of it before, evidenced by the rise of evergreen vehicles, the upsurge in direct investing and the growth of the infrastructure secondaries market. Still, it stands to be exacerbated by our new macro regime.

“Sellers may not be getting the valuation that they’re seeking in the current environment, so continuation funds have been a manner for sponsors to continue to optimise the asset and hold it for even longer than the fund life,” noted Jay Moody, a managing director with Alvarez & Marsal’s transaction advisory group and the firm’s lead of energy and infrastructure.

Sometimes, existing LPs have needed to exit assets that still have a lot of life in them. London-headquartered Ancala Partners, for example, recently found a new home for three of the UK-based assets in its 2017-vintage Ancala Infrastructure Fund I, with backing from Pantheon and others. Explaining why none of the assets’ original LPs decided to invest in the new vehicle housing them, Ancala managing partner Spence Clunie said: “A lot of the original investors were UK defined benefit pension schemes, and they wanted liquidity.”

These examples offer a reminder that the 10-to-12-year dominant fund model was not one designed specifically for infrastructure. Rather, the structure was inherited from private equity. While the asset class has grown and solidified – and as a new cycle kicks in – it has become clearer that this structure is often not in line with what large portions of assets need, and what different LPs want.

Infrastructure is one of private markets’ more stable income streams and the need for investment will likely transcend any structural friction the asset class may face.

Yet, as the gap between traditional infrastructure and ‘new wave’ infrastructure in the digital and energy transition sectors spreads, GPs have a renewed opportunity to ask: should these assets be housed in similar looking vehicles? What type of fund structure does one want for exposure to different subsectors? And on the LP side, one must ask: what type of fund structure would be best to house these assets in? Which would give me the best returns and optionality for liquidity?

The endpoint is not a one-size-fits-all solution, rather a heightened recognition that liquidity mechanisms are the way forward for a large portion of the asset class. Find a way to put them into fund structures from the get-go to reduce a lot of paperwork, negotiating and headaches.