Investing in private infrastructure that underpins crucial services supports fundamental economic and social functions. Key examples span clean energy production, power grid systems, water supply networks, energy transportation, maritime facilities, railways and highways, as well as data and internet infrastructure. The indispensable nature and dependable revenue streams of these assets provide investors with portfolio diversification, steady income, risk mitigation, extended investment horizons, and protection against inflation. They also tend to generate resilient cash flows across various economic conditions. While infrastructure investments are increasingly attractive, the current market environment seems particularly rich with opportunities, especially considering the ongoing global infrastructure supercycle. These distinguished traits were on show during the volatility of public capital markets in 2022: [1]
"A shift toward private markets is cushioning many of the world’s largest investors from the wreckage wrought by runaway inflation and spiraling interest rates."
Private infrastructure incomes enjoy a low historic correlation to stock, bond, currency and commodity markets. This feature of private assets accords crucial diversification to owner's investment portfolios and lowers overall portfolio volatility. The increased income yields typically available in infrastructure are also boosting their appeal to a wider array of investors and, over time, can additionally create capital gains, particularly if they are well-managed and located in high growth regions: [2]
"Australia’s largest pension fund wants to put more money into private-market investments and will further boost its exposure to overseas assets."
The Asia Pacific region is set to continue its unrivalled economic growth for decades to come, specifically in China, India and ASEAN. Goldman Sachs, a US investment bank, has projected the world's largest economies by 2075. They conclude China will overtake the USA to become the planets largest economy in nominal US$ terms by 2035, with India knocking the USA into third position by 2074. [3]
[1] www.businesstimes.com.sg/companies-markets/banking-finance/private-bets-shield-worlds-largest-investors-market-mayhem
[2] www.bloomberg.com/news/articles/2024-04-08/australiansuper-says-now-is-the-time-to-buy-private-assets
[3] www.goldmansachs.com/insights/goldman-sachs-research/the-path-to-2075-slower-global-growth-but-convergence-remains-intact
