“With the sector having a dividend yield of almost 5 per cent, it’s not hard to see why.”
Investors who seek to generate income by holding shares in companies that pay dividends may also be tempted to hold infrastructure vehicles after years of uncertainty surrounding such payouts.
Earlier this year Capita Asset Services reported strong growth in UK dividends for the second quarter of 2017.
But this marked a surprising turnaround from as recently as late 2016, when the forecaster warned that underlying dividend growth remained weak despite payouts being boosted by post-Brexit vote sterling weakness.
Global trends
Whatever an investor’s specific requirements, infrastructure has become a topical way to position for possible global trends.
In many developed economies, including the US and UK, the extended nature of loose monetary policy has led commentators to question whether central banks should now step aside, making way for fiscal stimulus – including new projects – from governments.
Particularly in the US, market expectations for stimulative policy have lessened since the beginning of this year.
This highlights one vulnerability that Amaya Assan, an investment research analyst at ratings agency Square Mile, is keen to point out: the reliance of many infrastructure projects on the political backdrop.
“The impact of political or regulatory decision making can be meaningful,” she says.
But opportunities remain to access assets with a long life, whether this be toll roads, ports, railways or other elements.
This is not to suggest infrastructure investment comes without any other drawbacks. For one thing, as Ms Assan notes, such assets can struggle in environments of rising interest rates and bond yields.
Those projects and areas with poor growth potential and high levels of debt can be hit particularly hard.
Liquidity
Infrastructure is also highly illiquid, because major assets such as bridges cannot be sold swiftly to satisfy investors who want their money back. For some, the risk of being unable to easily redeem on an investment means any exposure must be limited.
“The main problem is liquidity, as infrastructure projects can often span decades [and] it doesn't necessarily favour investors who may need short term access to funds.
"For this reason it probably should only constitute a small percentage of a portfolio, of under 10 per cent,” says Matthew Bird, an independent financial planner for Seer Green.
Some are more forthright on the issue and believe investors – particularly younger individuals with a long time to hold assets before they need the money – should simply accept this dynamic.
“They [younger investors] should consider multi-asset products and alternative products such as real estate and infrastructure,” explains Tom Hoops, head of business development at asset manager Legg Mason.
