Global listed infrastructure securities may deliver annualised total returns of 9-10 per cent in the next five to seven years, according to Zenith Investment Partners.
The research house said the asset class would likely outperform in the long term due to an urbanisation boom in emerging markets and the fact that companies within the asset class have inflation-linked cashflows.
“Listed international infrastructure has proven over the long term to generate a consistent level of outperformance, above global equities, on a hedged return basis,” Zenith investment analyst Andrew Cassar said.
“The consistency is attributed to the asset class’s significant degree of regulation, monopolistic operations, inflation-linked cashflows and low long-term correlation with the broader equity and fixed-income markets.
“The attributes listed enable infrastructure companies to pass on higher costs, as they eventuate, to maintain real revenue growth and enhance their likelihood of long-term outperformance.”
Cassar said while infrastructure securities are not immune to short-term share price volatility, their relatively predictable cashflows and high dividend yield provide relative income stability.
His comments follow Zenith’s completion of its 2010 international infrastructure sector report, which saw the RARE Infrastructure Value Fund manager gain a highly recommended rating, while five managers got a recommended rating.
Funds that were recommended included Colonial First State Wholesale Global Listed Infrastructure Securities, Magellan Infrastructure, Macquarie International Infrastructure Securities, C&S Global Listed Infrastructure and RARE Series Emerging Markets.
