Investors to flock to infrastructure investment as boundaries with real estate blurs

Two-thirds (66%) of investment advisers expect to see clients’ allocations to global infrastructure increase over the next three years, driven by widespread fear of a sustained downturn (94%), Brexit uncertainty (53%) and concern for global equity markets (47%), a new survey has found.

Increased investment into infrastructure is part of global blurring of boundaries with real estate, with many global fund managers combining the two formerly siloed teams into merged real asset divisions.

According to a new study commissioned by Foresight Group, advisers indicated that global equities are causing them the most concern within their portfolios whilst UK equities were also deemed to be a cause for worry. Foresight commissioned an infrastructure outlook survey in December 2018 and the results of the newest survey have been compared with this.  

In recent months there has been a decrease in the use of some traditional alternatives to equities such as bonds, gilts and absolute return funds1. Whilst these asset classes are reportedly being used more infrequently, infrastructure and property are the only non-traditional assets increasingly being used for their defensive qualities; low correlation to equity markets and low volatility.

Against a backdrop of fears over a sustained downturn, Brexit uncertainty and concern over global and UK equities, the majority of advisers (71%) asserted that the most important quality infrastructure assets provide is low correlation to equity markets. Almost three quarters (69%) would consider recommending a diversified infrastructure fund to address concerns about a market correction and equity market volatility.

The survey demonstrated an appetite for infrastructure investment funds on account of their increased availability (80%) whilst comparative results showed that since 2017, advisers predicting an increase in clients’ allocations to global infrastructure has more than doubled when only 32% of advisers predicted it would become popular. Two-thirds of advisers (66%) said that they anticipate an increase in their clients’ allocation to global infrastructure over the next three years.  

According to the study, almost two-thirds (64%) of advisers believe that exposure to global infrastructure assets complement UK-focused assets. For example, the opportunity to access assets that are largely unavailable via UK listed companies. A majority (57%) of the respondents claimed to have a positive outlook for listed infrastructure outside the UK.

Nick Scullion, Head of Foresight Capital Management and lead Fund Manager of the new global fund explains:

“This study shows how infrastructure is continuing to grow in popularity as its role as a low correlated, defensive asset class is now far better understood. There has been significant demand building among advisers for an opportunity to provide their clients with exposure to a global fund to complement our award-winning UK Infrastructure Income Fund.  We look forward to launching this in June.”

james.wallace@realassetmedia.com