News & media Maintaining Mandate Discipline in Digital Infrastructure: Lessons from the UK and Germany
By Conrad Swanston
Over the past decade or so, infrastructure has been one of the great beneficiaries of global capital flows. The Global Infrastructure Hub reported that between 2010 and 2021 private infrastructure capital raised by funds quadrupled[1]. Investors increased allocations in search of yield, duration and inflation protection, often with limited correlation to other asset classes.
This influx of capital has been driven by genuine investment need. The global infrastructure opportunity set remains vast, underpinned by themes requiring substantial long-term financing. Capital, however, has not flowed evenly. Fundraising has concentrated in the largest vehicles and most visible sub-sectors, creating intense competition for large-cap core assets and newer, high-profile themes where enthusiasm has outpaced the supply of investable opportunities.
The predictable result has been upward pressure on valuations and a gradual loosening of mandate definitions – a form of “mandate creep”.
When “core” stopped being core
At the centre of this shift has been a blurring of definitions. Assets that would once have been categorised as “Value-Add”, or even carrying corporate private-equity / growth-equity-like risk, have increasingly shown evidence of pricing and underwriting at “core infrastructure” return levels.
“Core” infrastructure equity has historically derived much of its appeal from its fixed-income-like characteristics, offering predictable contractual cash-flows with yields competitive to those available in public and private credit markets. In some subsectors, defensive characteristics can rival traditional fixed income. Mobile tower platforms, for example, generate lease revenues under long-term contracts with mobile network operators, where site payments are characterised as essential operating expenses and rank structurally ahead of debt service obligations. This creates an effective “super-seniority” for tower cash flows.
Development risk, shorter-term contracts, and greater exposure to competitive commercial markets have increasingly entered portfolios still labelled as “core”. Cash yield has correspondingly become less central to the return profile, replaced by a growing reliance on supportive exit valuations. This dynamic compounds risk, combining looser underwriting assumptions with an implicit dependence on favourable market conditions at exit.
A case study: Last-mile fibre
Last-mile fibre – the final, physical segment of a fibre-optic network that connects an Internet Service Provider’s (ISP) local hub directly to its end-user – provides a clear illustration of this evolution.
The surge of investment into fibre networks across the UK and Germany between 2019 and 2022 was framed around a compelling structural story. Data demand was rising, legacy copper networks were being phased out, and fibre was positioned as long-life digital infrastructure with stable, defensive characteristics. On that basis, assets were often priced and financed as if they were delivering predictable, contracted cash flows and investment flocked. Despite historically lagging, full-fibre (FTTP) coverage in the UK rose from around 6–10% in 2019 to nearly 45% by 2022[2]. Similarly, Germany also began a major rollout, passing 16 million homes with FTTH/B by the end of 2022[3].
In reality, many of these business models were far removed from traditional core infrastructure. They carried significant build risk, from construction execution to permitting and delays. Revenues depended on consumer uptake in competitive local markets rather than on long-term contracts with investment-grade counterparties. Pricing assumptions relied on rational behaviour from multiple new entrants, often building over the same streets. Leverage reflected confidence in refinancing or exit routes rather than early-stage cash generation.
This mismatch between perceived and actual risk is now being exposed. As networks have taken longer to reach scale, revenues have fallen short of underwriting cases. Competitive intensity has squeezed margins. For a time, these pressures were absorbed through covenant waivers and successive “amend-and-extend” solutions with creditors that deferred more fundamental outcomes. Higher interest rates have since increased pressure on these assets and closed off refinancing options that were previously assumed to be available. As a result, situations that might once have been managed through extensions are now tipping into restructurings; in several cases, equity has been wiped out, while lenders have been forced towards debt-for-equity solutions. In short – what was underwritten as “core” has behaved like something very different.
The lesson for institutional investors and asset managers
These outcomes do not imply that fibre is a flawed asset class. Fibre has delivered meaningful benefits and accelerated rollout. The investment lesson lies in capital discipline. Capital cycles have a way of exposing where discipline has drifted. In that sense, the recent stress in last-mile fibre across the UK and Germany is less an anomaly than a case study. It serves as a reminder that long-term capital is best deployed where risks are clearly understood, appropriately priced, and genuinely aligned with mandate objectives. For institutional investors and asset managers, the lesson is to approach digital infrastructure with the same stewardship mindset that has historically underpinned resilient infrastructure outcomes.
There are parts of digital infrastructure where this discipline has been maintained more consistently. Assets with better visibility to contracted cash flows, clear counterparty risk and limited exposure to consumer behaviour have, in many cases, proven more resilient through the recent period. These opportunities have often been found in less fashionable corners of the market, where market-specific or operational complexity can deter some investors, but where risk can be priced more accurately and returns have been achieved through income rather than exit assumptions.
For investors, the current stress in last-mile fibre is a reminder that structural growth does not eliminate commercial risk. Digital infrastructure is not monolithic, and treating it as such is an oversight. The action needed is to be precise about what is being bought, which risks are being taken, and whether those risks are consistent with the mandate and return expectations attached to the capital.
[1] https://cdn.gihub.org/umbraco/media/4807/availability-of-private-capital-for-infrastructure.pdf
[2] https://www.point-topic.com/post/broadband-availability-uk-end-2022#:~:text=As%20of%20the%20end%20of,their%20fibre%20networks%20during%202022.
[3] https://www.point-topic.com/post/mapping-broadband-coverage-germany-2023#:~:text=National%20coverage%20by%20broadband%20technology,%25%20of%20rural%20households%2C%20respectively.