My how times have changed! Anything which generates cash flows can be structured as an investment. Bridges, rail roads, toll roads, et cetera, all of these represent investment opportunities!
I have always liked infrastructure as an asset class and believe every long-term investor should consider allocating a portion of his or portfolio to such assets. The attractiveness of infrastructure assets come from their (usually) fixed cash flows, historically low correlation to traditional asset classes like equity and fixed income, long life, large barriers to entry, and low probability of obsolescence or switching.
This week’s deal involving Australian port operator Asciano and a potential multi-billion dollar deal involving London City Airport are two of the most recent examples of institutional investors continual involvement in this space.
As alluded to above, infrastructure assets have traditionally been the mainstay of large institutional investors such as sovereign wealth funds, pension funds, and hedge funds. However, things have changed in recent times and the average investor can now gain exposure to this exciting asset class via buying stock in publicly traded companies involved in the provision of public infrastructure.
For those investors looking to get in on the infrastructure game, it may be worthwhile to take a look at the following:
- Brookfield Infrastructure Partners (involved in the proposed Asciano transacation mentioned above, and owner of a host of infrastructure assets like railroads, toll roads, communications towers, and ports).
- Aeroports de Paris: Airport interests in France and in selected markets across The World.
- Fraport AG: Airport interests in Germany and selected markets around The World.
- Ferrovial SA: Airport and toll-road interests around The World.
The growth of infrastructure as an asset class is likely to continue as national governments around the world seek to ‘monetize’ such assets to fulfill spending commitments, reduce debt, et cetera, and the demand for these types of assets by large long-term investors (pension funds for example) are also likely to increase going forward to more closely match their long term liabilities.