We believe infrastructure assets, with their stable demand and critical services like utilities and telecommunications, offer valuable resilience against economic volatility.

Why do we think this? It’s because infrastructure assets provide inflation protection through long-term contracts with inflation-linked pricing, ensuring secure income streams.

They also enhance portfolio diversification due to their low correlation with other assets. Infrastructure markets tend to be driven by unique factors such as regulatory changes and technological advancements.

The global infrastructure spending megatrend

Global infrastructure spending is a megatrend supported by governments worldwide, driven by demographics and the need for economic growth. Major investments are also required in technology and clean energy sectors to achieve net-zero carbon targets.

Infrastructure equities

An accessible way to invest in infrastructure and access this megatrend is via listed equities. While past performance isn’t a guide to future returns, infrastructure equities have outperformed broader global equities over the long term, suggesting they have the potential to beat the broader market during downturns and periods of moderating growth.

We believe allocating to infrastructure should be a long-term, strategic decision due to the asset class’s performance, diversification and yield benefits (infrastructure assets offer approximately 3-4% yield per year(1)).

Three themes

Increasing urbanisation, energy transition, and digital acceleration are the three pivotal themes shaping future infrastructure investments.

Our global infrastructure equity strategy plays into these key areas. We embrace the next wave of innovation - encompassing artificial intelligence, the internet of things, robotics, clean technology and renewables. Our mission is to invest in companies poised to drive economic growth and deliver attractive returns for our clients.

Four sectors

We invest in four key sectors: transportation, utilities, energy, and communication. With over $1 billion in assets (2) and a track record of over 16 years, we aim to provide investors with a unique blend of growth, income, and inflation protection.

Global infrastructure investing in action

US electricity

In the US, rising electricity demand is driven by the expansion of datacentres, which are essential for supporting AI applications and digital services.

Datacentres are projected to account for nearly half of the growth in US electricity demand by 2030, surpassing the energy consumption of traditional manufacturing sectors (3).

Approximately one quarter of our global infrastructure equity portfolio is invested in electricity production-related stocks (typically in renewables). Half of this allocation is US-focused, including names like NextEra and Clearway Energy.

African telecoms

Africa is experiencing rapid data growth, driven by increased mobile phone usage, affordable data plans, and expanding internet infrastructure. The number of internet users has doubled in the last five years (4).

We invest in companies like IHS, which develops and constructs telecommunication infrastructure solutions. The company plays a key role in facilitating digital connectivity for communities, primarily in Nigeria.

Internet penetration in Nigeria is just 46% compared with the OECD average of 87% (5), so there is a significant growth opportunity.

Final thoughts

Infrastructure equity allows investors to tap into an important global megatrend via three long-term themes of urbanisation, energy transition, and digital acceleration.

By diversifying into this compelling equity subset, clients can potentially boost portfolio resilience and inflation protection amid current global economic uncertainty and trade tensions.

A version of this article was originally published in Investment Week.