‘Dry powder’ and realisation woes push investors towards infrastructure

Ahead of his appearance at the Australian Wealth Management Summit, Andrew McAuley, chief of investments at UBS Global Wealth Management Australia, said diversification across real assets is critical to building resilient portfolios.

Amid market fluctuations, economic instability and high interest rates, real assets have gained momentum as investors seek predictable, long-term income streams. Exposure to real assets also offers a potential hedge against inflation and enhances diversification of traditional portfolios.

Speaking ahead of his panel session at the upcoming summit, McAuley emphasised that “a portfolio should contain each of private equity, private credit, infrastructure and real estate.

“History shows that adding illiquid alternatives to traditional asset classes such as equities and bonds improves both return and volatility measures for a portfolio,” he said.

While private equity has traditionally dominated real asset allocation, offering strong long-term returns relative to risk, McAuley noted the landscape is shifting.

Private equity firms are currently flush with capital or “holding a lot of dry powder” as McAuley described. However, anecdotal evidence shows that realisations are proving difficult, leading investors to increasingly turn towards infrastructure investment.

“Infrastructure has evergreen characteristics, producing fairly consistent returns over the medium and long term,” McAuley said.

This stability can be particularly appealing in uncertain economic environments as it produces consistent annuity style cash flows, which are typically valued on a discounted cash flow basis, according to the UBS investment head.

As the push to electrify the global economy shows no signs of slowing, infrastructure may also benefit from the energy transition – further enhancing its appeal to investors.

“In a falling interest rate environment such as now, valuations should be supported as bond yields fall to some degree,” he said.

To hear Andrew McAuley speak further on safeguarding your portfolio through real asset diversification, come along to the Australian Wealth Management Summit 2025.

Run in partnership with principal partner, Metrics, the event will take place on Friday, 22 August 2025 at the Sofitel Sydney Wentworth. Click here to buy tickets.

To learn more about the summit, including the speakers and agenda, click here.