Infrastructure Asset Class

In particular, for investors focused on Global Growth Markets, or those seeking Global Growth Market exposure in their broader portfolios, infrastructure investments should be a preferred asset class to own.

By investing in infrastructure, investors can potentially benefit in multiple ways:

Long term nature - Long term nature of infrastructure cash flows enables investors to better match their assets & liabilities

Low correlation and volatility - Operating and financial performance of underlying projects has low or no correlation to macro environment.  Investment performance is highly predictable (i.e. little or no volatility)

Diversification - Enables diversification away from traditional asset classes

Yield orientation - A large part of total investment returns can be in form of current yield

Inflation hedge - Infrastructure investments can provide a hedge against inflation

Principal preservation -  High degree of downside protection through strong physical asset base and robust contracts, often backed by sovereign entities

Strong risk-adjusted returns - Over long term, Infrastructure has outperformed other assets after adjusting for risks

Infrastructure in Global Growth Market offers not only...

  • Strong return premium over developed markets: The returns in Global Growth Markets infrastructure are materially higher compared to developed markets, even though these assets have a strong performance track record and, arguably, better risk profile. 
  • Predictable returns, locked-in for long term: Infrastructure assets allow investors to lock-in the returns for long periods of time, reducing volatility and reinvestment risk.
  • Exposure to economic growth: through defensive businesses that own monopoly assets and have high barriers to entry.

……but also, Global Growth Market infrastructure projects are structurally more robust due to:

  • Sovereign backing: The projects are typically sovereign-backed, in the form of offtake agreements (power plants), grant of concession rights (ports, airports), regulated monopolies (gas, water, municipal waste and electricity networks) and financial support (capital grants, concessional loans, equity).
  • FX protection: is either embedded in offtake contracts (e.g. power plants) or available through the income stream (e.g. ports, airports)
  • Conservative capital structures: which reduce the volatility of free cash flows generated through the life of the investments and minimises refinancing risk.