Road, rail, port
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.
Frequently Asked Questions about this Article…
Infrastructure investment is gaining importance because it offers steady, predictable, and inflation-linked returns. As our cities grow and the demand for infrastructure increases, investing in this sector can provide a defensive asset that helps lower overall portfolio volatility.
Investing in infrastructure assets can provide steady and predictable returns that are often linked to inflation. These assets are typically monopolistic, meaning they face little competition, which can lead to more stable income streams for investors.
Retail investors can invest in infrastructure by purchasing shares in listed infrastructure stocks like Sydney Airports or Transurban. Alternatively, they can invest in infrastructure funds, which offer diversification and can include global infrastructure opportunities.
Infrastructure is considered a defensive asset class because it tends to deliver stable and predictable returns, even during economic downturns. This stability can help reduce overall portfolio volatility, making it an attractive option for risk-averse investors.
Examples of listed infrastructure stocks include Sydney Airports (SYD) and Transurban (TCL). These companies manage essential infrastructure assets that provide reliable income streams.
Investors might prefer infrastructure funds because they offer diversification across multiple infrastructure assets, reducing the risk associated with investing in a single company. Funds can also provide access to global infrastructure opportunities.
Private investment is crucial in addressing Australia's infrastructure challenges as it provides the necessary capital to fund large-scale projects. With the population and freight demands expected to grow significantly, private investment will be key to meeting these infrastructure needs.
The monopolistic nature of infrastructure assets benefits investors by reducing competition, which can lead to more stable and predictable income streams. For example, it's unlikely that a second Sydney Harbour Tunnel will be built, ensuring the existing asset remains a critical and profitable piece of infrastructure.
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