The impact of unlisted infrastructure assets on portfolios
Summary
It appears the global low interest rate environment is continuing to spur investor appetite for alternative asset classes – like unlisted infrastructure – that can offer potentially higher risk-adjusted returns. This comes at a time
of increased uncertainty around the return outlook for ‘traditional’ asset classes, notably equity and fixed income. Indeed, we believe the diversification benefits of alternative asset classes are likely to be highly sought after
as we enter the post-recession global economic environment.
Unlisted infrastructure is moving out of the ‘alternatives’ category and sitting beside other unlisted asset classes such as unlisted property. This is especially true for long-term patient capital where infrastructure portfolios
can provide a strong foundation for relatively stable long term returns.
-Alex Joiner, IFM Chief Economist
This article is an abridged version of our recent white paper, The impact of infrastructure on portfolio efficiency and diversification (Mar 2021)1 . It suggests that unlisted infrastructure does have the potential to contribute
to improved risk/return outcomes from a portfolio perspective. This adds to the relatively small but growing body of literature supporting what is already relatively well known: unlisted infrastructure has the potential to provide solid returns
in a low-yielding world that can facilitate effective portfolio diversification and contribute to improved risk adjusted returns.
We also demonstrate how excluding unlisted infrastructure from a portfolio, and an over-reliance on traditional asset classes of fixed income and equites, risks leading to a less efficient portfolio than may otherwise be the case.
1 The full version of the white paper is available on request.
About the author
Chief Economist
Alex Joiner, PhD
Joined in 2016
Bachelor of Economics (Hons) (Latrobe University), PhD (Econometrics) (Monash University).
Alex is IFM Investors’ Chief Economist and has more than a decade of experience in the field. He is responsible for the firm’s economic, financial market and policy analysis and forecasting. Alex is also a member of the firm’s Investment Committee. Prior to joining IFM Investors, Alex was the Australian Chief Economist for Bank of America Merrill Lynch. In this role, Alex was responsible for providing economic insight and forecasts across asset classes and conveying these views to both domestic and global investors. Alex was also previously a Senior Economist at the ANZ Bank.
About the author
Economist
Frans van den Bogaerde
Joined in 2019
Frans supports the Chief Economist with the firm’s economic, financial market, and policy analysis and forecasting. He holds a Bachelor of Commerce (Finance & Economics) with Honours in Finance (First Class) from the University of Melbourne. Prior to joining IFM Investors Frans was undertaking his Honours degree and was a researcher with the Brain Mind and Markets Lab at the University of Melbourne.