Investors should consider listed infrastructure

RARE-Infrastructure/RARE/infrastructure/nick-langley/market/global/

19 September 2018
| By Oksana Patron |
image
image
expand image

As the global market is approaching the late economic cycle, investors should consider adding listed infrastructure assets into their portfolios, according to RARE Infrastructure’s co-chief executive and co-chief investment officer, Nick Langley.

Listed infrastructure typically was characterised by low volatility and a predictable earnings stream, which made it an asset that would “tick the defensive box”, he said.

“Consensus opinion is that after a 10-year bull run markets are most likely approaching their ‘late economic cycle’ phase,” he said. 

“Recent history shows that an interest rate yield curve inversion - where short-term rates are greater than long-term rates - immediately precedes a recession, and it is worth noting that the spread between short and long-term US rates is only 32 basis points (as at 30 June 2018).”

Additionally, the research recently showed that listed infrastructure performed on par with returns from direct ownership of infrastructure assets, making listed infrastructure a simple and convenient way to access the benefits of this asset class.

What is more, global listed infrastructure, compared to ‘only domestic listed’ assets would provide another layer of investor protection.

“For Australian investors, it is worth noting that global listed Infrastructure stocks have low correlation to the AUD, domestic equities and global bonds which makes them an ideal vehicle to provide portfolio diversification,” Langley said.

“Current ideas for RARE’s Value and Income Strategies include increasing the holdings of stocks whose returns are insulated from GDP fluctuations, namely utilities.”

As far as geographies were concerned, RARE said it would focus on US and Canadian utilities due to the forecast strong GDP growth of these economies.

“An example is the recent portfolio addition of Canadian utilities Emera which generates 90 per cent of its earnings from its regulated operations in Florida, New Mexico, Maine and Nova Scotia. We have also increased our conviction in North American pipelines as the valuations have been very attractive.”

 

Read more about:

AUTHOR

Recommended for you

sub-bgsidebar subscription

Never miss the latest news and developments in wealth management industry

MARKET INSIGHTS

So we are now underwriting criminal scams?...

2 months 3 weeks ago

Glad to see the back of you Steve. You made financial more expensive, not more affordable as you claim, and presided ...

2 months 3 weeks ago

Completely agree Peter. The definition of 'significant change is circumstances relevant to the scope of the advice' is s...

4 months 4 weeks ago

ASIC has suspended the Australian Financial Services Licence of a Melbourne-based financial advice firm....

1 week 4 days ago

The corporate regulator has issued infringement notices to three AFSLs whose financial advisers provided personal advice to a retail client while unregistered....

2 weeks 2 days ago

ASIC has released the results of its first adviser exam to be held in 2025, with 241 candidates attempting the test....

3 weeks ago

TOP PERFORMING FUNDS

ACS FIXED INT - AUSTRALIA/GLOBAL BOND