A growing need to replace dated or build new infrastructure assets coupled with a "public fiscal position that’s very weak" has created a good investment environment, according to 4 Dimensions chief investment officer Sarah Shaw.
As a result, low growth and low interest rates don’t necessarily equate to low returns for infrastructure, Ms Shaw said.
Ms Shaw noted that recent B20 Business Summit talks suggested that “by 2030 we’re going to need an additional $60-70 trillion dollars’ worth of infrastructure globally”, driven by a lack of infrastructure spending over the last three decades, the appearance of a middle class in emerging economies and global population growth.
“In 1900 we had 1.65 billion people globally; in 2000 we had over 6 billion. We’ve seen that a lot of our infrastructure is over 100 years old, so it was infrastructure built for 1.65 billion people, and we’re now expecting 11 billion people by 2100, so if we don’t start investing in infrastructure, we’re just going to go backwards,” she said.
Many governments aren’t in a position to finance many of these projects themselves, according to Ms Shaw, and are “going to have to rely on private sector investment more and more”.
Ms Shaw added that fiscal stimulus programmes being considered or implemented in many countries also benefited infrastructure investors, citing a recent ¥3 trillion ($38 billion) commitment made by the Japanese government as an example.
“You have a huge need, you have the ability to invest and the balance sheets to invest, you have the governments that need your help, and you have a very low credit rate in the market to support that investment,” Ms Shaw said.
The current state of volatility within global markets is also unlikely to affect infrastructure returns, she said, noting that while listed infrastructure had outperformed global equities over the last 12 years, it is still a defensive asset class.
“In up-markets, you’re not going to be as up as much as your more sexy stocks, but in your more down markets you’re definitely not going to be down as far, and when you’re in flat markets you actually do better, so overall over that period, you’ve actually outperformed,” she said.
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