Infrastructure developments continue to redefine our lives – and it's a core priority for this year's G20., and what's the best way to add it to your portfolio?
Expect 'infrastructure' to become a household term over the months – maybe even years, ahead.
According to the Business Council's Chief Executive Jennifer Westacott, "With our population set to grow to 38 million and our cities to almost double in size by 2050, and with the freight task to almost double by 2030, Australia has a significant infrastructure challenge in front of it."
Undoubtedly, meeting that challenge will rely - in part at least, on private investment capital.
The trend to privatisation
It's no secret that Treasurer Joe Hockey admires the NSW approach to infrastructure funding. Since coming to office in 2011, the O'Farrell Government has sold off Sydney's desalination plant, Port Botany and Port Wollongong and has announced the sale of Macquarie Generation to AGL Energy for $1.72 billion.
Clearly when it comes to infrastructure big projects – and big money go hand in hand.
But retail investors can also get a slice of the infrastructure action. And as an asset class infrastructure has plenty to offer.
A defensive asset
Ron Hodge, Managing Director, InvestSMART.com.au explains, "Infrastructure assets tend to deliver, steady, predictable, inflation-linked returns. It's also regarded as a defensive asset so it can be useful to lower overall portfolio volatility."
It also doesn't hurt that infrastructure assets tend to be monopolistic. After all, who's going to build a second Sydney Harbour Tunnel?
Key highways to infrastructure
For retail investors, there are two main routes to head into infrastructure. One option is a direct investment in listed infrastructure stock like Sydney Airports (SYD) or Transurban (TCL).
Given the often monopolistic nature of the underlying assets, investors may prefer the diversity of an infrastructure fund.
It's even possible to tap into global infrastructure. AMP Capital for instance offers unlisted hedged and unhedged global infrastructure funds.