Welcome to Pathways, a Macquarie Asset Management podcast where we provide fresh perspectives and insights for institutional investors and consultants about real assets, private markets, and macroeconomics.
Daniel McCormack
Private capital secondaries — the buying and selling of stakes in funds and assets that already exist — plays a really important role in private markets. It provides liquidity, but not only that: funds can offer investors a great entry point into high-quality assets. Today, we're going to go a layer deeper and look at infrastructure secondaries in particular. This part of the market has been growing even faster than the overall secondaries market, albeit off a lower base.
Hi everybody, my name's Daniel McCormack. I'm Macquarie Asset Management's Head of Research. Joining me today is Wandy Hoh, who co-authored our team's paper on infrastructure secondaries. We're going to lean on that paper quite heavily in today's discussion, but we'll also talk about what's going on more broadly in the market.
There are three parts to this conversation. First, the market backdrop — why infrastructure secondaries are growing the way they are right now. Second, we're going to dig into the substance of the matter, which is how you find and underwrite good deals — and that's really Wandy's day job, so it's fantastic to have her on the podcast today. Third, we'll look at what all this means for investors in terms of deciding whether and how to allocate to the space.
So, Wandy, welcome to the podcast.
Wandy Hoh
Thank you, Daniel. So great to be here.
Daniel McCormack
Before we get into the detail — in one sentence, why should somebody already investing in infrastructure care about the secondaries market specifically?
Wandy Hoh
If you look at the secondaries market today, it's no longer a workaround or something on the side — it's become a true asset class in itself, and a product in itself, to help investors deploy capital into infrastructure and help investors who are looking for liquidity for their assets access that capital, before the fund life expires.
Daniel McCormack
Great — so let's dig into the market backdrop, and let's start broad. How big is the secondaries market, and how much of that is infrastructure?
Wandy Hoh
If you look at the overall secondaries market, it's been the strongest ever first half in 2026. If we measure it by deal volume, in the first six months — according to Evercore, Lazard, and a bunch of other advisors we track research reports from — the market is at the $120 billion mark in secondaries transaction volume. That's up nearly 20% year on year. This is tremendous growth, and it's not just happening in 2026 — this is the second, third, fourth year we've been seeing this type of growth, and it continues to be the case.
When you look at infrastructure as a sub-sector of that asset class, in the first half of this year we were seeing around $12 billion, year over year. Last year, total deal volume exceeded $20 billion. This year, I think we could possibly go to $30 billion for the full year. So this asset class is actually the highest-compounding sub-sector of secondaries, at roughly an over-25% compound annual growth rate between 2016 and 2025. It's really impressive, and it also speaks to why this asset class is here to stay — an important tool for investors, whether as a buyer or as a seller.
Daniel McCormack
So it's growing faster than the broader secondaries market — that's really interesting. What's driving that strong growth you're seeing, Wandy?
Wandy Hoh
I think there are a couple of things. The first is that, since interest rates increased at the end of 2021, we've seen a few years of DPI decline — historically, that hasn't been the case. If you look at the ten years prior to 2022, you saw DPI at roughly 25% of NAV on an overall, fairly mature portfolio, in distributions per year. That declined to 13% since 2022, and that's been the case as of last year, 2025, as well. I don't think 2026 is shaping up to be any better.
So the first driver is that investors increasingly have to think about portfolio management tools that give them more liquidity — and we're not talking about distressed liquidity here. We're talking about how to manage cash flows so you can deploy into new investments, meet certain obligations, and think about overall portfolio construction. That's really been driving the boom.
But if you look back, this actually makes a lot of sense. Private markets have experienced one of the strongest growth periods since the GFC — in the past ten years, this asset class has grown tremendously. And secondaries always moves in parallel and adjacent to the primary asset class. So the growth in primary markets since the GFC, coupled with the DPI story, coupled with investors thinking more and more about how to best manage their portfolio for efficiency — you're seeing very strong growth in secondaries as a result.
Daniel McCormack
Yeah, that's fascinating — and that's the supply side. What about the demand side? Is there enough capital chasing all of this?
Wandy Hoh
Certainly. Everyone will say infrastructure secondaries feels like the fastest-growing asset class, and we'd agree with that in terms of volume and the capital being raised. But if you look at whether there's enough capital to really match the volume we're seeing, infrastructure secondaries actually has one of the lowest dry powder ratios compared to other asset classes.
Dry powder ratio is a simple metric — how much dry powder capital you'd have relative to the most recent yearly volume. For infrastructure secondaries, it's at 0.5 times. Compare that to secondaries as a whole, which is over 1 times, or to direct investments in infrastructure and buyout, which are over 2 times. So it's the most undercapitalized asset class compared to the general private markets arena.
When you think about closed-ended funds, how long it takes to raise capital, and how many years you need that capital for deployment — you're in a constant fundraising cycle in this asset class. That's actually great, because it means you can be really choosy about what you deploy your capital into. But it also means there's a lot of room for growth and for new entrants to come in, each finding where they can do best in terms of portfolio construction.
Daniel McCormack
So it's not a particularly crowded space, then — not as crowded as buyout secondaries, for example.
Wandy Hoh
Right, and it's probably not as crowded as primary infrastructure either, if you think about it. As an asset class that touches both infrastructure and secondaries, it's relatively less crowded — the number of GPs in this particular asset class is far lower than what you'd see in either buyout secondaries or primary infrastructure.
Daniel McCormack
Let's shift gears and drill into the infrastructure secondaries market specifically. Let's start with the obvious question: discounts. If infrastructure is hot right now, why would anything trade at a discount to net asset value?
Wandy Hoh
This is such a good question — I get it at almost every client meeting I go to. The answer is that discount isn't all made the same. If you look at the overall picture, the reality is that not everything is trading at a discount. GP-leds, for example, have for the most part been trading at par, or even above par at times. That's because for really good assets, the intrinsic value is much higher than the current book value — the growth potential is so much better than what it's currently marked at that it warrants a higher price than NAV.
When you look at other portfolios, though, there's actually quite a dispersion between discounts. Marks aren't scientific — they're different across GPs, and NAVs may reflect different views on asset valuations. To really understand how discounts work, you can't just look at the headline price, because at the end of the day it's a fraction: what's the denominator? Is this a discount to current NAV, or to a prior NAV? What we really focus on is the discount to intrinsic value — what do you think this asset will be worth in the future, and is what you're willing to pay a discount to that? That's what investors and buyers should really be focused on.
Daniel McCormack
Yeah, absolutely — and there's quite a bit of variation in NAVs by manager, as you say, so not all NAVs are created equal. Can you give me an example of a discount that's more about the seller than the asset?
Wandy Hoh
When we think about why people sell, there are all sorts of reasons. It could be regulatory — one thing that's happened in recent years is regulatory capital going up, so certain financial institutions holding private market assets find it a lot more costly than it used to be. So it's about managing your portfolio for efficiency, and selling isn't simply about generating a profit from the sale — sometimes it's just needing the dollars, or shifting into another investment type. You can have a change in the CIO, or sellers just looking to move things by a certain date for reporting reasons.
So there's a lot of individuality that comes into pricing, and why sellers are willing to accept certain pricing. The market is becoming more and more efficient, so you do get clearing prices, but the reality is there's just not enough capital for everything. When similar portfolios or funds come up, and you've already purchased something similar in the past, you might have less appetite for increased exposure, which changes your pricing. Other investors might see it as a different part of their portfolio construction, seeking a different outcome — maybe IRR or ROIC characteristics — which will also change what they're willing to pay. So there are lots of reasons, and from the seller side it can be very individual to their current needs.
Daniel McCormack
That's great, Wandy, thank you. Let's dig into how you actually go about finding what you'd consider a good opportunity. If it's not really about NAVs and discounts, since those vary by manager or situation, how do you identify a good opportunity in the secondaries space?
Wandy Hoh
At the end of the day, it comes down to really understanding the assets. Our job is to underwrite the assets — we look at a fund that's already been invested for the most part, we look at how an asset has performed over the past few years, and we put a valuation on it based on what we think it's worth today and in the future. That's not very different from underwriting a direct investment into an infrastructure asset — you have to understand where that asset operates, the regulatory environment, what you project for it in the future, and the macro view for that sector. All of that has to go into your underwriting assumptions. You look at historical comps, and then you add another layer: how you think the GP will perform and act in managing their funds. So first and foremost, you really do need to understand the infrastructure space.
Daniel McCormack
What that tells me is that it's all about expertise — breadth and depth of knowledge, experience in the space — and that's just as additive here as it is in the primary market.
Wandy Hoh
Exactly. Take a toll road, for example — a toll road isn't going to operate the same way in Texas as in the Northeast, and if you take it to another country — say, a toll road in Italy versus one in France — it will operate very differently because of the regulatory regime and what the contracted revenue scheme looks like. All of those outcomes, and the growth — roads are very much aligned with population growth, and what we expect those growth rates to be — are very specific to where that toll road operates. So you really need that deep infrastructure expertise, not just in understanding the regulatory regime, but on the ground. Experience in understanding the population and the geography is a big part of understanding whether something will be successful.
Daniel McCormack
The politics as well, Wandy — that's a big part of the equation, which feeds into the regulatory situation. Having people in the local jurisdiction, local knowledge, connections, and engagement with stakeholders is really important.
Wandy Hoh
Absolutely.
Daniel McCormack
Let's shift gears again. In the research team, Wandy, the question we get asked most by clients these days is whether AI, and therefore data centers, is a bubble. So I can't let you off the podcast without asking exactly that — is all of this space a bubble, in your view?
Wandy Hoh
I get asked that a lot too, Dan — you're not the only one. It seems to be the hottest question these days. If you think about something that's discussed all the time, and you hear about all the infrastructure and data centers being built out — especially around AI — you're going to have that feeling. But if you look at the numbers, and I know you've done a lot of research, Dan, we're not at capacity, nor are we even building close to the capacity we're all hoping to reach.
What's important to understand is that not all data centers are made the same — there are different off-takers, and different geographies mean different regulatory regimes. On the secondaries side, we get the benefit of being able to look at many different data centers across portfolios, GPs, geographies, and vintages. A data center invested in five or seven years ago versus a new one coming up will have a very different business plan and execution.
So when we think about building out our infrastructure secondaries portfolio, we're looking for diversification across geography, to manage risk so we don't have concentrated exposure in one area. We're looking for diversification in off-takers, and in regulatory environment, so you're not exposed to the same regulatory regime everywhere — because, as you mentioned earlier, Dan, government and politics make a big difference for these types of investments. The way you invest also makes a difference — who you're partnering with. If you look at recent transactions, more and more there are partnerships with hyperscalers, which are quite interesting. And there are other places to play in this AI boom besides data centers — fiber is one to think about; dark fiber is more and more an area we're thinking about, and subsea fiber is quite interesting too.
So not all data centers are made the same — there's plenty of room to play, but understanding them, and the very specific details around them, is really the best way to construct a healthy data center portfolio exposure.
Daniel McCormack
We've looked at this question in the research team, and in our view, this tech boom has quite a way to run still. Obviously spending is ramping very quickly, but the growth in generative AI is stupendous, and the underlying technology could be very powerful for productivity — even more powerful than the internet was in the late 1990s — so it could sustain fundamentally more spending than that boom did.
And then I think the other thing people don't realize, from an infrastructure investing perspective, Wandy, is just the resilience of data centers' operational performance to a rollover in that space if it were to happen — certainly not our base case, but if it did, a lot of these data centers have contractual arrangements with some of the most creditworthy companies on the planet, and those arrangements run for 10 to 15 years. So most of the risk falls with the hyperscalers, not with the data centers underlying them, and I think that's a point that isn't completely understood out there. Might it impact the multiple you pay for a data center? Sure. But in terms of operational performance, they're likely to continue along fairly well, even in the face of a downturn. So that should give investors in the space a bit of comfort.
You mentioned earlier that the buyer pool is relatively thin — is that changing at all?
Wandy Hoh
Yeah, I think it's definitely growing. We've seen a relatively low amount of actual new entrants coming into the space from a pure GP standpoint, but more and more you're seeing different investors becoming interested in the asset class itself — individual LPs, different types of financial institutions looking to deploy capital into infrastructure secondaries, because the dynamics are so attractive, especially when you're lacking DPI and can mitigate the J-curve, get earlier distributions, and shorten duration.
But if you look at how many new entrants have come in and how much capital's actually been raised, versus the growth rate in volume, the two are still mismatched. One thing I want to watch is the growth of '40 Act funds — we're seeing a lot of this on the secondaries side, especially around private equity. It's less so in infrastructure for now; we're seeing some of it as part of larger infrastructure vehicles on the '40 Act side, but individual vehicles focused specifically on infrastructure secondaries aren't as prominent, and haven't been growing as quickly as on the PE secondaries side. So there's still a lot of room. We think a dry powder ratio of less than one isn't really where we want to be — we want it higher, because you want enough capacity to address sellers who want to sell. So there's a lot of space to raise more capital, and for differentiated buyers to come into the space.
Daniel McCormack
Great — let's talk about distributions, DPI. This is a huge topic across private markets at the moment. Does it matter more in the infrastructure secondaries space, and if so, why?
Wandy Hoh
You'd think it should, and I think investors do care more, because as an asset class, infrastructure investors already expect DPI to come with yield — they expect infrastructure to generate yield, so there should be DPI coming from their investments. But as infrastructure has grown and the types of investment have expanded, not all investments — especially core-plus and value-add buckets — generate yield from day one. So for investors to have a product where they can get earlier DPI while still investing in this asset class is very attractive, because it's a feature they're actually anticipating and want.
What we're doing in infrastructure secondaries is amplifying the opportunity to generate that DPI faster, and give back distributions to investors more quickly, while still investing in the fundamental reasons you want infrastructure in the first place — resilient assets, inflation protection, something countercyclical to, or less correlated with, your other asset classes. So you get all those characteristics, you invest in assets with high barriers to entry, and you also get more DPI and more distributions out of it. It's a win-win proposition for investors, and it's something investors should be looking out for: is your secondaries investment generating DPI?
Daniel McCormack
Yeah, really important for the stability of returns as well — yield tends to make a huge difference over time, so it's a really good attribute.
Before we shift to portfolio considerations, Wandy, and talk about this from an investor's perspective — one last question on this topic, and I guess this brings it all together: if you had to boil it down, what's the single biggest difference between committing to a primary fund and buying into a secondary fund?
Wandy Hoh
It's really about being able to acquire a portfolio of much more mature assets — buying the assets — versus investing in a manager on a blind-pool basis and betting on what the future might look like in terms of how they deploy that capital, and what the macro environment might look like. With secondaries, it's like a time machine — there are no time machines in this world, you'd think, but uniquely, secondaries is like buying into a time capsule. You can go back in time and invest in earlier vintages. Say you started your program today but want something more mature — a secondaries portfolio can provide investments in existing assets, versus a primary, which is an investment into future assets you don't know about yet. That's the single biggest difference, and I always give the analogy that you're really investing in a time capsule.
Daniel McCormack
So let's talk about portfolio considerations — what this actually means for an investor building a portfolio. Why would they want infrastructure secondaries in there? Where does it fit in the portfolio?
Wandy Hoh
If you think about a mature portfolio, secondaries make a lot of sense to give you diversification into different managers than what's currently in your portfolio — and you're not just accessing those managers in the future, you're accessing what they've already done, paying for assets at what they should be valued at today. So even for a mature manager, this works — you can boost your DPI with this investment, and your capital is deployed in a product likely to generate more distributions over a shorter period.
For a new investor, infrastructure secondaries can give immediate access to a diversified portfolio of seasoned assets, and diversification is always key for any portfolio. Instead of having to invest in ten different managers on day one, investing in a secondaries manager gives you access to ten different managers, or more, buying assets that are already mature and harvesting. It can also really smooth out your J-curve when coupled with other primaries. So for the same characteristics, it can benefit both a mature investor and a new investor in infrastructure.
Daniel McCormack
Yeah, diversification is obviously a key reason people come to private markets and to infrastructure, and if you're going the secondaries route, you're just turbocharging that — that seems like a clear benefit to me, for sure.
Quite a few positives there, Wandy, but what should investors be cautious about when thinking about secondaries?
Wandy Hoh
At the end of the day, you have to be cautious that if you buy at a discount, that doesn't necessarily mean you're getting a great deal, or that you'll automatically make money just from buying at a discount. Information transparency is another one — you may not have as transparent information. What we do as my day job is triangulate all the different pieces, and as much information as you can get, to come up with the right investment thesis, the right due diligence, and the correct underwriting for what the asset is really worth. Those are the two things I'd be paying close attention to.
And then, in terms of placement — if you add a secondaries fund to your portfolio, it's going to give you money back quicker, but it's probably likely to generate a lower multiple, because you're not holding on to things as long. That gives you a great opportunity, when you do get the money back, to redeploy — into another secondaries fund, or another investment of your choosing. It gives you a lot more options, because the duration, and the distributions from that investment, are shorter.
Daniel McCormack
And last one on this section — is now, in your view, genuinely a good entry point? I know people are incentivized to always say it's a good entry point for their particular fund — but is it genuinely so at the moment? What would you say?
Wandy Hoh
I think this is a great entry point. If you think about deploying capital toward this space right now, the DPI story seems set to continue. But at some point, these investments will be sold, and you could be coming into a time when distributions happen even earlier than anticipated, because there's a floodgate waiting to be opened. We don't know exactly when, but there are certain signs of it starting to show, especially with some big exits happening in recent months.
I'd say it's just a matter of timing right now — very specific timing, where, with the growth of infrastructure secondaries, a lower dry powder ratio means more capital coming in is actually beneficial for the overall market, and you can be deploying into a group of assets that will see realizations faster than you think. It's a very interesting time for investors to be thinking about this market, and certainly one where this investment product can add a really interesting dimension to overall portfolio construction.
Daniel McCormack
Yeah — and bond yields, as we record this podcast, Wandy, just continue to rise. Obviously there have been problems with exits in the private equity space, so there's probably plenty of pressure to come as we go forward. So it's a really interesting time, I think, for secondaries.
That finishes the formal part of our podcast, but we do a quickfire Q&A, if that's okay with you — one or two sentence answers for each question. We've got five or six here, I think. Are you up for it, Wandy?
Wandy Hoh
I am, I'm ready. So fire away.
Daniel McCormack
All right. So, what in your view is the biggest misconception about infrastructure secondaries?
Wandy Hoh
That the discount is the return. The return comes from the asset, not from the paper discount.
Daniel McCormack
Got it. LP-led or GP-led — which side of the market is more interesting?
Wandy Hoh
They're both really interesting. I think GP-led, definitely, for assets you already know and trust, and maybe for alpha performance in the overall portfolio. LP-led, for sure, as the base of any secondaries portfolio construction, for diversification you might not otherwise have.
Daniel McCormack
One thing that might change your mind about the sector?
Wandy Hoh
If we saw a sustained, prolonged period of DPI, or exits, not recovering. At the end of the day, secondaries will still have to rely on those exits to send back distributions, and if that doesn't happen, it would indicate the private markets sector is in trouble — and I don't think secondaries is immune to that.
Daniel McCormack
Data centers — five years from now, what will the story be? Will they still be in the headlines, or will it be one more story of a bubble that burst, like others throughout history?
Wandy Hoh
I think it continues to be a headline, because the physical infrastructure stays, and you need data centers to operate. What might be less interesting going forward is what AI displaces — could be software, and we're already hearing about that. But data centers, because of the long-dated infrastructure asset aspect, are here to stay and will continue to be a headline.
Daniel McCormack
And the last question: what are the one or two things you love most about the infrastructure secondaries market?
Wandy Hoh
I love being able to interact with sellers, because you're actually helping them with a solution — it's a solutions business. Whether the seller is an LP or a GP, you're partnering with them to come up with a plan for their own individual situation. I really enjoy that interaction.
The second thing is the ability to look at all different types of infrastructure across the globe, and understand how these various portfolios and investments — thousands of them — contribute to the essential services and things we use every day. It's fascinating. Most of the time, people don't think about the infrastructure they're using in daily life — who's behind it, who supported it, who built it, what the outlook is, how it's going to change. You just don't think about those things, but we get to think about them every day, and it's fascinating to me. It's great.
Daniel McCormack
I wholeheartedly agree — I think it is about solutions, secondaries, and providing something very important to private markets: liquidity, which private markets lack to a degree. From my perspective, I hope the space only grows over time, because it's performing a really important function.
Wandy, thank you very much for coming on the podcast.
If there's one idea I'd leave people with, I'd reiterate Wandy's point that it's not the discount, or the deal — it's the asset underneath it, and understanding its true intrinsic value is really key to successful investing, both in the primary market and in secondaries. Right now, the buyers who genuinely understand these assets have more to choose from than the capital chasing them can absorb, so it's a great opportunity.
For listeners who want the full detail, please go and read the paper — the link is in the show notes. And until next time, on the Pathways podcast.
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