Digitalization, the energy transition and growing concerns over energy security are driving substantial investment needs across infrastructure markets. Meeting these demands requires not only significant amounts of capital but also financing solutions that can accommodate long-term projects and diverse risk profiles. For institutional investors, infrastructure debt offers exposure to these structural trends while providing the potential for predictable income, attractive yields and portfolio diversification. Matt Norman, Head of Infrastructure Debt at Allianz Global Investors, discusses the opportunities emerging across digital and energy infrastructure, the risks investors must navigate, and the factors that could make infrastructure debt a more prominent portfolio allocation.

The infrastructure debt market entered 2026 with strong momentum following record issuance in 2025. More than 2,300 deals closed globally, representing over $1 trillion in volume and an increase of more than 30 percent compared with the previous year. Activity was robust across several core European markets, including the UK, Germany and Spain, as well as the US. “The significant number of large-scale ‘jumbo’ deals exceeding $3 billion that closed in 2025 really showcases the strength, diversity and investor appetite across the infrastructure debt market,” says Norman.

“The significant number of large-scale ‘jumbo’ deals exceeding $3 billion that closed in 2025 really showcases the strength, diversity and investor appetite across the infrastructure debt market.”

Matt Norman, Head of Infrastructure Debt at Allianz Global Investors.

Norman identifies the energy transition and ongoing digitalization as the principal structural drivers of demand. “This is being driven by the tailwinds of the long-term mega trends in both energy transition and ongoing digitalization,” he reiterates. Transportation and logistics also offer opportunities, particularly as businesses and investors focus on supply-chain resilience and decarbonization.

Digital Infrastructure Requires Selectivity

Within digital infrastructure, fiber networks and data centers are among the areas where Norman sees sustained demand for private capital, especially in hyperscalers and multi-tenants. In fiber, attractive opportunities exist in growth markets with transparent regulatory frameworks, sound fundamentals and barriers to entry that help mitigate the risk of overbuilding. “We see attractive opportunities to deploy capital across various growth markets which are underpinned by transparent regulatory frameworks, solid fundamentals, appropriate entry barriers that help mitigate overbuild risk, and established brownfield operators,” observes Norman.

“We see attractive opportunities to deploy capital across various growth markets which are underpinned by transparent regulatory frameworks, solid fundamentals, appropriate entry barriers that help mitigate overbuild risk, and established brownfield operators.”

Matt Norman, Head of Infrastructure Debt at Allianz Global Investors.

He notes that certain parts of the market, particularly Fiber to the Home (FTTH), are under pressure and anticipates future consolidation in this market triggering potential opportunities for mergers and acquisitions. “We have taken a consistent view that the FTTH market is suitable for institutional investors with investment-grade appetite, but only once the assets have established a market position and offer stable cash flow generation,” says Norman. “Therefore, investment in this sector makes sense but only with the right risk-return profile.”

Data centers present a different set of opportunities and constraints. Activity in the US remains robust, supported by large, multibillion-dollar transactions, while Europe is progressing more slowly as projects contend with power availability, permitting and grid-connection challenges. Nevertheless, Norman sees compelling opportunities in the data center space. “We are observing many compelling projects in the data center space with various characteristics including those with strong co-location features and supportive contract framework with solid counterparties.”

Financing the Energy Transition

The energy transition presents another substantial source of demand for infrastructure debt. In Europe, the investment required to modernize electricity networks is particularly significant. Norman points to estimates from the European Commission and the International Energy Agency indicating that more than €500 billion will be needed for European electricity grids by 2030.

Offshore wind and power grids represent major investment opportunities. “The sheer size of investment necessary here is requiring utilities and developers to seek innovative solutions to mobilize fully both private and public capital to share this major funding requirement,” says Norman. Beyond these large-scale projects, Norman sees opportunities across distributed generation, electric-vehicle charging infrastructure, battery energy storage systems, and onshore wind and solar.

“The sheer size of investment necessary here is requiring utilities and developers to seek innovative solutions to mobilize fully both private and public capital to share this major funding requirement.”

Matt Norman, Head of Infrastructure Debt at Allianz Global Investors.

Many mid-market developers and platforms have already secured pipelines of permitted assets but require additional funding and structuring expertise to realize their potential. “This provides an interesting flow of greenfield, asset-related opportunities across different parts of the capital structure,” according to Norman. This creates opportunities for lenders across different parts of the capital structure, including shorter-term financing to bridge specific situations such as asset disposals, sponsor exits or the securing of power purchase agreements and other offtake contracts.

Geopolitical Uncertainty Raises the Importance of Credit Discipline

Beyond individual sectors, geopolitical uncertainty is strengthening the case for infrastructure debt among institutional investors seeking income and diversification. “We anticipate that infrastructure debt will become increasingly attractive for institutional investors given the fundamental characteristics of the underlying asset class,” argues Norman. “These include stable and predictable returns, inflation-linked protection, and portfolio diversification versus traditional public markets.”

“We anticipate that infrastructure debt will become increasingly attractive for institutional investors given the fundamental characteristics of the underlying asset class. These include stable and predictable returns, inflation-linked protection, and portfolio diversification.”

Matt Norman, Head of Infrastructure Debt at Allianz Global Investors.

The asset class has also navigated several challenging environments over the past five years, including the Covid-19 pandemic, the war in Ukraine and a period of elevated inflation. In Norman’s assessment, this experience demonstrates the resilience of infrastructure debt, although outcomes continue to depend on the characteristics and financing of individual assets.

The market’s appeal is also attracting capital, intensifying competition for opportunities. Investors therefore need to remain disciplined rather than allowing strong demand for infrastructure financing to weaken underwriting standards. “Investors need to stay focused on the credit fundamentals and be alert to key emerging risks such as fiber consolidation and overbuild, renewable curtailment, merchant power price volatility and construction risk as supply-chain resilience is tested once again,” Norman says.

From Niche Allocation to Portfolio Building Block

Despite the expanding opportunity set, infrastructure debt remains a relatively small allocation in many institutional portfolios. “Given the increasing geopolitical uncertainty, the stronger push for sovereignty and the enhanced focus on energy security and independence, particularly in Europe where the economic cost of energy price shocks will be significant and will be unevenly distributed, we can anticipate that the tailwinds are further strengthening the case for the asset class.”

Relative value also supports the asset class’s appeal. Norman notes that investment-grade infrastructure debt offered returns of 4.5-5.0 percent in euros and 6.0-6.5 percent in sterling in 2025. Cross-over and subordinated debt also offered attractive relative value across euro- and US dollar-denominated markets, providing investors with a range of risk-return profiles.

“Infrastructure debt is well positioned to evolve from a niche allocation into a core building block of institutional portfolios.”

Matt Norman, Head of Infrastructure Debt at Allianz Global Investors.

Regulatory developments could further encourage adoption. Norman points to the treatment of infrastructure debt under Solvency II in Europe, as well as pension reforms that could improve institutional access to the asset class. “The favorable treatment by regulators such as Solvency II in Europe or pension reforms will provide further fuel to a quicker adoption and accessibility of infrastructure debt overall.”

For Norman, the combination of financing needs, portfolio diversification and relative value creates a credible case for infrastructure debt to assume a more central role in institutional portfolios. “As these structural tailwinds continue to strengthen, infrastructure debt is well positioned to evolve from a niche allocation into a core building block of institutional portfolios.”