More education is necessary on infrastructure, and where exactly it fits into a portfolio. Krystine Lumanta reports.
Infrastructure as an asset class only started to gain some attention maybe five or 10 years ago. However, after demonstrating the benefits of a stable income stream and inflation protection, it’s finally come into its own.
Financial planners now recognise infrastructure as an appropriate investment for their clients. But before further allocations are made to these assets, more education about the two infrastructure types – listed and direct (or unlisted) – needs to get out to the marketplace.
Tom McDonald, portfolio analyst at Russell Investments, describes infrastructure as the assets that provide the services essential for a functioning economy, such as energy, transport and water.
“These are all kind of mundane assets,” he says. “But in effect, they’re of paramount significance to a given society; and by investing in infrastructure, whether listed or unlisted, you’re essentially buying into assets which are designed to improve the standard of living of a given community or society.
“That’s the fundamental premise behind infrastructure.”
Sarah Shaw, emerging market specialist at AMP Capital Investors, says that the Australian market gener- ally understands infrastructure well after being an earlier adopter of the alternative asset class.
“With any new asset class, it takes time for it to earn a spot in a portfolio allocation decision,” she says.
“We took a big step [backwards] in 2009, and that was the result of…a number of collapsed [vehicles] that burnt Australian planners a little bit and Australian investors.
“But what I would point out going into this cycle is that Australians recognised their problem back then – the ones that have survived have won, cleaned up their balance sheets, they’re not borrowing to pay dividends any more and they’re being operated as infrastructure assets, as opposed to financial gearing products, today.”
Shaw says the goal, therefore, is to make planners comfortable with the asset class and educate them of the differences it has to offer.
To download a a PDF of the full Special Report, please CLICK HERE
