Covid-19 market volatility spurs demand for infrastructure, say financial intermediaries
A new study reveals that over half (54 per cent) of financial intermediaries believe that infrastructure is seeing the biggest surge in investor demand among all asset classes in response to the Covid-19 crisis, over twice the number who chose equities (20 per cent) and fixed income (19 per cent).
According to the research, which was conducted among 112 intermediaries by Foresight Group (Foresight), an independent infrastructure and private equity manager, almost three-quarters (72 per cent) of intermediaries anticipate their clients’ exposure to infrastructure will increase over the next three years.
Foresight’s study, which has been published as a white paper – “Stability in adversity” – highlights the three biggest drivers behind infrastructure’s growing popularity among financial intermediaries: its low correlation to traditional assets (73 per cent); defensive qualities (66 per cent); and low volatility (58 per cent).
Financial intermediaries are turning to infrastructure to generate a sustainable income, according to the study. With total dividend payouts set to be the lowest since 20151, three-quarters (75 per cent) of intermediaries say they are likely to consider using infrastructure within their traditional equity income allocation to access sustainable income during the current economic uncertainty caused by Covid-19, including 24 per cent who say they are ‘extremely likely’.
Nearly half of respondents (47 per cent) say infrastructure is the asset class best-placed to produce a regular income during the current economic crisis caused by Covid-19, ahead of both equities (21 per cent) and fixed income (13 per cent).
The study follows the announcement of FP Foresight Global Real Infrastructure Fund’s first 12 months performance figures. The Fund achieved a total return of 18.51 per cent over 12 months, outperforming all competing indices over the period. As well as this, the Fund provided a yield of 4.12 per cent over 12 months, exhibiting lower volatility levels than higher risk asset classes such as high-yield debt.
Nick Scullion, Head of Foresight Capital Management, says: “Advisers recognise that their clients’ portfolios will need to adapt to the new reality if their goals are to be met. They also appreciate the benefits that infrastructure can bring to portfolios in terms of providing stability in the face of market adversity.
“In a fast-changing and challenging environment, investors are increasingly looking towards ‘real’ physical assets to generate reliable, regular income and preserve capital values against inflation risks. Infrastructure is an asset class whose time has come, offering enduring solutions to today’s global challenges.”