Real & Consistent Returns
Infrastructure has the potential for consistent returns through finance and market cycles. Why? Because infrastructure assets underpin our society and are used daily, examples of utilities such as electricity and gas or transport such as rail and omnibus assets. Due to the fact, these things are necessities, they don’t rely on disposable income. In addition, infrastructure assets are often monopolies, or operate in markets where the barriers to entry are high, meaning they are often free from the competitive pressures faced by many more traditional companies.
Help Reach Income Targets
Infrastructure assets often provide consistent, long-term income results because their revenues are often regulated utilities and services or are tied to long term contracts with trustworthy and substantial organisations. Consequently, infrastructure assets can often produce high levels of revenue security into the future. Revenues are often calibrated to inflation thereby assuring secure revenue paths into the future.
Infrastructure generally, just like its commodities are often classified as “unfailable”. When interest rates are low and returns appear compressed, such asset classes provide a “defence” element to a portfolio. It is a long term strategy in most eyes. But certainly, a solid income performer in all weather environments.
The World is Crying Out for More Infrastructure
Infrastructure is an investment theme that will play out because the need for it is a never-ending cycle. Growing populations need to be supported by additional infrastructure while ageing infrastructure needs to be periodically upgraded or replaced. Investment in infrastructure helps stimulate sustainability, long-term growth, employment, which then creates a need for more infrastructure. Ultimately, infrastructure is a self-fulfilling asset area that build the pathways to more requirements.
Risks of investing in infrastructure
With any investment, there are risks. Some common risks are around dealflow and pricing, interest rate stability and refinancing risk, regulatory and political risk and operating risk. Lack of liquidity can also be a risk in unlisted infrastructure assets.