June 11, 2019

Practical considerations for listed infrastructure

Infrastructure is an investment category often seen by investors as a diversification tool that can provide a hedge to long-term liabilities by offering exposure to potentially stable returns and steady income. FTSE Russell defines core infrastructure companies as those that own, manage or operate structures or networks used for the processing or moving goods, services, information and data, people, energy and necessities from one location to another.

Infrastructure assets have shown the ability to generate a steady income stream — an increasingly valuable feature in an environment dominated by low interest rates. In addition to higher dividend yields, listed infrastructure investments have historically offered higher risk-adjusted return and a more resilient income profile during downturns. In this paper, we seek to substantiate these infrastructure investment theses in practice:

  • Listed infrastructure may have attractive properties with its own income profile, risk drivers and characteristics. Total capitalisation of core infrastructure equities adjusted for free float is substantial at over US$ 2 trillion. 
  • Relatively high dividend yield, inflation protection and stable income will appeal to investors seeking less volatile, long-term returns. 
  • In market downturns, infrastructure has exhibited defensive qualities, which attracts attention of investors in times of high volatility. 
  • Listed infrastructure also has relatively high risk-adjusted returns historically compared to the wider equity market. 
  • Greater diversification and historically higher risk-adjusted returns offer additional reasons for market participants to consider infrastructure for their global investment portfolios. 
  • The FTSE Infrastructure Index Series provides the means to measure and benchmark the returns of globally listed infrastructure companies. FTSE Russell Infrastructure Indexes offer practical and flexible tools for investors seeking tactical or strategic exposure to the investment segment.

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