Thematic Equity Investing Infrastructure
Why invest in infrastructure?
Every modern economy relies on infrastructure. The creation of economic value in a scalable and sustainable way is inconceivable without an efficient transportation system, a power grid, or an effective communications network.
Planning, building, operating, and managing these infrastructure assets is a capital-intensive business. Many governments, in both emerging and developed economies, are increasingly taking advantage of the know-how and efficiency of the private sector to help meet their infrastructure needs. This creates a broad range of opportunities for investors, such as airports, toll roads, energy transmission, and telecommunication towers, to name but a few.
Infrastructure investments are characterized by very stable and long-term cash flows. Highway tolls, airport fees, and electricity tariffs are defined under long-term contracts or by regulation and are typically inflation-adjusted.
Currently a number of factors are driving investments in infrastructure beyond the usual steady pace of renewal and growth.
- After years of underinvestment, deteriorating critical infrastructure is starting to negatively impact economic growth.
- Driven by fiscal constraints, governments are engaging with the private sector to achieve targets.
- Furthermore, infrastructure spending has a high economic multiplier effect and is an effective creator of jobs.
- In emerging markets, population growth and increasing standards of living drive the need for new infrastructure.
- Interest rates at historic lows provide ideal funding conditions.
- Most infrastructure assets have inflation-protected returns.
With the fund, Credit Suisse Asset Management has designed a well-balanced, global solution that enables investors to take advantage of this long-term growth theme.
- Focus on companies active in the infrastructure sector can lead to significant sector/regional exposure.
- A slowdown in the global economy might impact the infrastructure sector.
- Liquidity risk (exposure to small caps).
- Equity markets can be volatile in the short term.
Infrastructure equity in rising rate environment
Connecting the world with “One Belt, One Road”
Infrastructure: The enormous US opportunity
Revival of European Infrastructure Expenditure
Toll Roads: One Possible Solution to Limited Public Finances
Airports: Central Hubs for Steadily Growing Air Traffic