More opportunities to emerge in infrastructure
The diversity of global infrastructure assets available for investment is expected to increase in coming years, while the infrastructure market is tipped to continue to offer secure and predictable cash streams, and low risk profiles with varying levels of growth.
Macquarie head of infrastructure securities Jon Fitch said there was a trend in developed countries, particularly the United States and Europe, to increase the level of privatisation of infrastructure assets, paving the way for greater diversification opportunities for investors.
Fitch said in the United States toll roads and airports, for example, were currently state-owned in most cases but this was likely to change in future.
He said rapid development in countries such as China and India was also creating opportunities for private investment, as demand for infrastructure in these countries increased in line with their economic development.
He said the global infrastructure market had grown from around $600 billion 10 years ago to a current size of around $2 trillion, with around 350 listed infrastructure companies now operating in the space.
Only 3 per cent of infrastructure assets for investment are located in Australia.
Fitch said infrastructure assets were essential services that were strategically positioned with high barriers to entry and had the ability to pass on inflationary price increases.
He said these characteristics, together with the yield, risk and growth profiles of the asset class and its low correlation to other asset classes made it an attractive inclusion in all kinds of diversified portfolio.
“We think an appropriate allocation of infrastructure assets in growth portfolios would be about 10 per cent, 7.5 per cent in balanced portfolios and around 3 per cent in capital stable portfolios,” he said.
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