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Outlook 2022: Engaging Opportunities

During the COVID-19 pandemic, considerable stimulus was injected into several economies in the world. In some jurisdictions, stimulus was directed toward a variety of infrastructure programs to aid economic recovery and broader-based economic multipliers. On the horizon will be the potential for asset sales from governments to help balance finances. The 5G and data infrastructure trends also remain robust across the globe and tend to offer greater than typical infrastructure growth rates.

Long term, we remain focused on inflationary pressures. We continue to believe a lower for longer theme exists and helps boost valuation in infrastructure. There are mixed impacts in the infrastructure sector, including (a) potential sector rotation; (b) a preference for economically sensitive sub-sectors; and (c) regulated assets can benefit from higher returns in inflationary environments, but can translate into timing issues.

We continue to expect increased asset allocation to infrastructure from pension funds, sovereign wealth funds, and broadly given the risk-adjusted returns available compared to the returns available in fixed income and securities markets. Given the historically low-interest rates along with some underlying infrastructure asset valuations, we expect the presence of private capital into public markets to likely accelerate from pension funds and private equity sources.

@Andrew Kuske