On the developed side, there are leaky water pipes, fatigued electrical connectors, aging power generators that need repair and upgrade. On the emerging side, there are growing populations that need more transportation capacity in air, sea, roads and rail.
Whichever side you’re on, well-structured infrastructure investment can be an attractive long-term sector that has yet to see significant representation in many equity portfolios.
Infrastructure assets can be a source of potential risk-adjusted and inflation-linked returns. They can also provide long-term yields and capital growth, which could be meaningful given today’s uncertain markets.
Infrastructure concessions in the form of a public-private partnership (also known as PPP or P3) have cash flows backed by long-term government contracts. This makes them a viable potential income source for institutional investors with longer investment horizons.
There’s often a lack of available data on important infrastructure statistics such as volumes, quality of assets and public spending. This makes investing in infrastructure a challenge.
We believe that with the proper active management tools, such information can be acquired. We conduct infrastructure research across the globe including on-the-ground in London, Edinburgh, Paris, Madrid and Sydney.
As a pioneer in PPP investing, our specialist direct infrastructure team has an established track record in this hard-to-access category. They have navigated the high barriers to entry in the primary market utilizing their industry reputation and breadth of relationships. It is a combination of these components that has allowed us to provide institutional investors portfolio exposure to social and economic projects.
Risk premium over project phase of infrastructure investment
Source: McKinsey, “Using PPPs to fund critical infrastructure projects.” 2014.