What's Driving The Demand For Listed Infrastructure?

Why listed infrastructure? Let’s follow the logic chain: Equity-market volatility, low fixed-income yields, and increased economic uncertainty all stand as potential stumbling blocks that threaten to derail even the best-laid of plans. Amidst all of this, the value of investments that can offer potential for greater diversification and downside protection—and also serve as additional sources of income as well as opportunities for growth over time—is becoming increasingly clear.

Perhaps nowhere is this more apparent than in the listed infrastructure asset class, which continues to draw the attention of investors seeking to capture its potential benefits in multi-asset portfolios. This is due in part to the increasing mainstream appeal of infrastructure investing, which has evolved significantly since the early 1990s. Back then, the market capitalization of the broad universe of publicly traded infrastructure companies was approximately $500 billion. Today, it stands at approximately $3 to $4 trillion.1 What exactly is powering this increased demand for listed infrastructure? We believe there are six key factors responsible.

1. Access to a global growth opportunity

Upgrading the world’s infrastructure will likely be a dominant theme over the coming decades. In fact, per a McKinsey Global Institute estimate, a staggering $69 trillion will need to be spent on critical infrastructure by the year 2035 to keep up with projected global demand.2 In addition, given the cash-strapped positions of many governments and municipalities, there’s likely to be an increasing reliance on private capital to finance infrastructure spending needs.

(Click on image to enlarge)

Updated infrastructure spending chart

In addition to high-level spending requirements, there are also several structural growth themes at play across the infrastructure investment universe. For example:

Airports: Commercial air travel has witnessed significant growth over recent decades, with total passengers per year increasing from 1.46 billion in 1998 to 3.97 billion in 2017. By 2037, it’s expected that the number of individuals flying on commercial aircraft globally will reach 8.2 billion.3

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