Infrastructure investors have been riding a wave of uncertainty in recent quarters. The Federal Reserve has raised interest rate benchmarks 11 times in the past year and a half to cool inflation, bringing its key federal funds rate to a target range of 5.25 to 5.5 percent. Sky-high interest rates are waterfalling into other key aspects of business, and fundraising activity and deal volume have lagged as investors sat on their hands for much of 2023. At the core of many conversations is the denominator effect, which occurs when the value of one part of a portfolio — typically the public holdings — significantly decreases relative to the other parts — the private assets — bringing down the overall portfolio’s value. As a result, the segments of the portfolio, such as infrastructure, that did not decrease in value occupy a bigger piece of the pie.

This can result in investors being overweighted to their allocation target in certain asset classes within a portfolio. For