Stay Defensive Boost Allocation to Infrastructure Assets
In challenging markets for a 60/40 portfolio boost private assets allocation to include Infrastructure Assets
As investors look for diversify from the traditional 60/40 portfolio with rising stock markets and falling bond yields, examine infrastructure as an asset class.
· In an inflationary world with stable, inflation-adjusted cash flows, in critical asset backed, defensive assets complimented with income distributions and potential equity upside.
· With growing deficits world-wide the public sector will need to private infrastructure to build out critical areas including especially pertinent today energy independence.
Until 2040 there will be a $12 trillion financing gap for infrastructure globally.
Private Infrastructure: private infrastructure offers a more defensive profile with potential private equity like value-creation upside complimenting a private assets allocation.
1. RESILIENT UNDERLYING ASSETS: Invest in assets providing essential services with high barriers to entry. Energy & Utilities, Transport, Social Infrastructure, Telecoms, and Renewables
2. INFLATION-LINKED REVENUES: Infrastructure investments are structured with revenues indexed to inflation (naturally or contractually)
3. DIVERSIFICATION IN A PRIVATE INVESTMENT ALLOCATION: Infrastructure offers an exposure to different assets compared with traditional companies or real estate assets
4. A GROWING ASSET CLASS: Private Infrastructure asset class is significantly growing, with USD101bn raised between Q1 and Q3 2021
5. REGULAR INCOME DISTRIBUTIONS: Stable and predictable cash flows of underlying assets allow infrastructure to make regular distributions
6. LOW VOLATILITY IN REVENUES: Infrastructure deals generate revenues through concessions and long-term contracts with counterparts (governments, blue-chip infrastructure service providers, etc.)
Hence, we would consider infrastructure assets as part of a private assets allocation.