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
Alex Joiner is Chief Economist at IFM Investors. He is responsible for the firm’s economic, financial market and geopolitical risk analysis that is key in IFM’s investment process. In this capacity he engages with IFM’s domestic and global clients on macro-investment trends and themes. He is a frequent commentator on economic and markets via traditional and social media and regularly speaks at public forums and conferences. He has over two decades of professional experience in economic and markets and prior to joining IFM was the Chief Economist at Bank of America Merrill Lynch (Australian & New Zealand) after being a senior economist at ANZ Bank. He holds a First Class honours degree in Economics and a PhD in Econometrics from Monash University. Alex is also committee member of the Australian Business Economists.
About the author
Economist
Frans van den Bogaerde, CFA
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.