What's Driving The Demand For Listed Infrastructure?

Wireless towers: Global growth in the demand for wireless data continues at a seemingly insatiable pace. Contributing factors include increased smartphone usage, data-intensive applications that utilize live-streaming and/or video and the rise in mobile banking. Consider that in the U.S. alone, consumers used 82% more mobile data in 2018 than a year earlier.4

Renewable energy: Limiting climate change, reducing carbon dioxide emissions and improving energy efficiency is also creating significant investment opportunities. Bloomberg estimates $11.5 trillion will be invested in new power generation from now through 2050, with a significant portion of that being directed at renewables.5

In each of the examples above, owners of critical infrastructure assets are poised to benefit from positive structural trends. Given that sourcing growth opportunities in this late-cycle economic environment has become increasingly challenging, infrastructure presents a compelling choice.

2. Enhanced yield potential relative to equities and bonds

While infrastructure investments have historically provided a relatively high dividend yield, just as importantly, they’ve also exhibited predictable and resilient cash flows. This cash flow resiliency across differing economic environments, as well as the ability to generate a steady income stream, is due to the fact that infrastructure assets provide essential services and typically operate in monopoly-like competitive positions.

Yields as of June 2019

3. Diversification and downside protection

As a defensive alternative to equities, exposure to infrastructure can help manage total portfolio volatility, given its forecasted low correlations to stocks, bonds, and real estate. Since 2001, infrastructure securities have outperformed global equities during 15 of the 20 quarters where the Russell Global® Index experienced a negative quarterly return. On average, the S&P Global Infrastructure® Index has outperformed global equities by 2.9% per quarter during negative quarters.9 It’s this downside protection and the potential to avoid the impact of negative compounding (remember, a $1,000 investment which loses 50% of its value has to return 100% to attain its original value) that is likely capturing the attention of investors.

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