About Real Assets - Infrastructure
What are infrastructure investments?
Investing in infrastructure is about providing capital to fund and manage long-term real assets that are socially and economically important to communities. While there are many different methods of financing and running these assets across a diverse range of sectors and industries, the common aim for any infrastructure investor is to generate long-term, stable and attractive returns through cash yields.
Due to the fact that projects such as new airports, roads and power facilities are in high demand in most places around the world, there is always a need for fresh capital to finance infrastructure. This need for greater investment has led to governments developing schemes that encourage more private funding into the sector in order to help meeting the capital requirements of projects and to kick start local economies.
Why invest in infrastructure?
Infrastructure investments are an attractive option to investors for two main reasons:
Attractive Risk Profile
Infrastructure investment can be categorised as having a lower level of risk in comparison to other asset classes, although there are different stages of investment in projects that can offer different risk/return characteristics. This comes about from the fact that infrastructure assets have high barriers to entry and less risk of being supplanted by a competing asset.
Long-term Reliable Cash Returns
Investments in infrastructure can offer the benefit of a reliable dividend that is inflation-linked. As a result, a significant proportion of the return comes from income generated by the asset itself, as opposed to appreciation in value. The long-term nature of most infrastructure projects means that this steady income stream aligns with the long-term liabilities that many institutional investors have.