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Infrastructure

Infrastructure investing

Infrastructure encompasses a diverse range of long-lasting, capital-intensive assets essential for society. This includes communication infrastructure like mobile towers and satellites, utilities such as water and waste management, and transportation hubs like airports, ports, and toll roads. The sector’s formal establishment as an asset class came with the privatization of assets in the 1990s, attracting significant investment from private investors.

What is infrastructure investing?

Infrastructure investment involves investing in essential, long-term physical assets, particularly ones – as the name suggests – that are key for societal infrastructure. This is a varied type of investment, where assets can range from roads and bridges to schools and parks, or encompass communication infrastructure and utilities like waste management or renewables.

Infrastructure investment could include anything from levying private banking lending toward greenfield investing, taking place before the assets are constructed, to investing in the equity of pre-existing infrastructure assets like airports or toll roads.

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What to consider before investing in infrastructure

While an infrastructure investment fund certainly offers a great deal of potential stability, there are always factors to consider. 

Downside protection

Infrastructure is inherently useful and necessary, so can offer protection against economic cycles – a population will always need essential services like power, communications and transportation, no matter what is happening in the economy at large.

Infrastructure investments also often involve long-term contracts, offering resilience to economic volatility and market fluctuations. Nonetheless, these investments are still susceptible to project delays and operational issues.

Returns

Infrastructure investing can generate a steady cash flow – for example, investing in a toll road or waste treatment facility might bring with it the opportunity for a government contract that runs for years to come.

This can provide consistent income and attractive risk-adjusted returns, whether stemming from long-term contracts or regulated income streams. However, these returns can be affected by regulatory changes and political risks.

Diversification

Infrastructure historically exhibits low correlation with traditional asset classes like stocks, bonds, and other investments, making it a valuable addition to diversified portfolios.

Inflation protection

Many Infrastructure companies generate revenue indexed to inflation due to their market position, regulation, or existing contracts, offering a hedge against inflationary pressures. However, this protection may lag during sudden inflation spikes.

Our infrastructure offering

To learn more about our Infrastructure product suite, please contact your Relationship Manager.

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Risks of investing in private markets

The value of investments and any income from them can go down as well as up and investors may not get back the amount originally invested. Past performance information presented is not indicative of future performance. The return and costs may increase or decrease as a result of currency fluctuations. 

  • Liquidity Risk - Investors may be unable to dispose of an investment quickly and at a price that’s closely related to recent similar transactions. There is no guarantee of distributions and no established secondary market.
  • Event Risk - A significant event may cause a substantial decline in the market value of all securities. 
  • Long-term Horizon - Investors should expect to be locked-in for the full term of the investment, which is subject to extensions.
  • No Capital Protection - Investors may lose the entirety of invested capital.
  • Unpredictable Cashflows - Capital may be called and distributed at short notice.
  • Economic Conditions - Ability to realise/divest from existing investments depends on market conditions and the regulatory environment.
  • Risk of Forfeiture - Failure to make call payments could result in forfeiture of commitment, including invested capital, without compensation.
  • Default Risk - in the event of default investors risk losing their entire remaining interest in the vehicle and may be subject to legal proceedings to recover unfunded commitments.
  • Reliance on Third-party Management Teams - Underlying investments will be managed by various third-party management teams that will in aggregate determine the eventual returns for the investor.

The risk factors listed above are not exhaustive, always refer to product specific documentation for full details and risk disclosures. 

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