The greatest investment theme of our lives
Download the full story in our Global Infrastructure white paper.
The need for infrastructure investment is a never ending cycle. Investment in infrastructure helps stimulate sustainable long-term economic growth which then creates a further need for infrastructure.1 Ultimately, infrastructure promotes higher living standards as it fosters economic growth and creates jobs. The World Economic Forum estimates that every dollar spent on infrastructure generates an economic return of between 5 to 25%. Infrastructure is the backbone for economies to develop and remain competitive.
Infrastructure is the backbone for economies to develop and remain competitive.
The future growth in infrastructure will not only be driven by the need for new infrastructure, particularly in developing economies, but also to replace existing ageing infrastructure, perhaps first constructed decades ago in developed economies. Since the 1970s, real public infrastructure investment in advanced economies has been falling as a percentage of GDP, as demonstrated in the chart below. This has left many infrastructure projects deferred and even abandoned, ultimately magnifying the infrastructure gap that is only expected to widen going forward.
Real public investment (% of GDP, advanced economies)
Why invest in global listed infrastructure?
Investors have been increasingly recognising the benefits of global listed infrastructure and its stable, reliable and growing cash flows. In addition, global listed infrastructure also displays complementary attributes to other asset classes in a balanced portfolio. It can play the role of a low risk bedrock within a global equities allocation. It may be a low risk alternative for fixed income investments, and it can quickly increase a real asset exposure due its liquidity. With such unique investment characteristics, built on the stable, reliable and growing cash flows, global listed infrastructure can play a number of roles in a balanced portfolio and we believe it should be a key consideration for every investor.
Diversifying from existing global equities
In addition to the higher risk-adjusted returns than global equities, global listed infrastructure also offers appealing diversification qualities compared to the broader market. Correlations are now starting to settle in the 0.6-0.7 range, where we expect they will stabilise. The essential service nature of global listed infrastructure companies’ activities and their stable, reliable and growing cash flows, means that capital preservation is another notable characteristic. This can be seen through the upside and downside capture displayed relative to global equities, the relatively good performance in up markets, and the relatively more defensive performance in down months.
To learn more download the full white paper for free now!