As a broad asset class underlying the full spectrum of economic activity and a non-cyclical slant, infrastructure debt has attributes that stand out for investors. One key point is that many of the services financed with these bonds are indexed, protecting cash flows from rising inflation. Also, the debt typically has floating rate coupons that are adjusted when interest rates rise.
Listen to this Talking heads podcast with investment director Stephanie Passet as she discusses the stability and resilience of infrastructure debt with chief market strategist Daniel Morris. She highlights the low correlation of the bonds with listed financial products and singles out junior debt as a potential source of additional yield. Sector-wise, she expects further growth in energy transition and digitalisation segments such as EV charging, smart grids and in social infrastructure.
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Please note that articles may contain technical language. For this reason, they may not be suitable for readers without professional investment experience.
Any views expressed here are those of the author as of the date of publication, are based on available information, and are subject to change without notice. Individual portfolio management teams may hold different views and may take different investment decisions for different clients. This document does not constitute investment advice.
The value of investments and the income they generate may go down as well as up and it is possible that investors will not recover their initial outlay. Past performance is no guarantee for future returns.
Investing in emerging markets, or specialised or restricted sectors is likely to be subject to a higher-than-average volatility due to a high degree of concentration, greater uncertainty because less information is available, there is less liquidity or due to greater sensitivity to changes in market conditions (social, political and economic conditions).
Some emerging markets offer less security than the majority of international developed markets. For this reason, services for portfolio transactions, liquidation and conservation on behalf of funds invested in emerging markets may carry greater risk.