Spending on infrastructure and capital projects is expected to be worth over US$9 trillion per year by 2025, according to PWC, more than double the US$4 trillion spend estimated for 2012. Growth in the global population, increasing urbanisation, and upgrades to outdated assets continue to drive spending across many sectors, including social (for example schools and healthcare), utilities (including water and sanitation), and transport.
These projects are typically funded by public spending, but many governments are heavily indebted. They are looking for other sources of funding, and they are eager to encourage private investment. Direct investment in specific infrastructure projects is usually limited to larger investors, but smaller investors can also gain access via listed entities such as infrastructure companies or investment trusts.
Investing in infrastructure comes with many attractive features. They typically offer a reliable stream of cash flows with the potential for growth linked with inflation. They also typically offer returns backed by a government sponsor, providing security of returns. In combination, these features mean that infrastructure can be a good source of returns that are lowly correlated with other mainstream investments. We believe infrastructure can play an effective role in a multi-asset portfolio, helping to diversify potential returns and offering a source of steady long-term performance.
Steve Waddington – Insight, a BNY Mellon company