Stock market infrastructure make sense – and in the long run

  • Stock market infrastructure make sense – and in the long run
    Independent.t. E.
    Infrastructure has many attractive qualities as an asset class and is one of the fastest growing alternative asset classes. It is divided into two types – listed and Unlisted. These reasons keep capital core infrastructure of the company, and the unregistered is the capital investment in real infrastructure assets, i.e. equity. In our opinion, the first is much more preferable. Infrastructure asset is typically some form of economic infrastructure – the port or the airport, on the road or electric network. Additional categories include social infrastructure and renewable energy assets.
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Infrastructure has many attractive qualities as an asset class and is one of the fastest growing alternative asset classes. It is divided into two types – listed and Unlisted. These reasons keep capital core infrastructure of the company, and the unregistered is the capital investment in real infrastructure assets, i.e. equity. In our opinion, the first is much more preferable. Infrastructure asset is typically some form of economic infrastructure – the port or the airport, on the road or electric network. Additional categories include social infrastructure and renewable energy assets.

Infrastructure gives investors the security features that are required when exposed to cyclical trends will likely benefit from improved economic growth. Infrastructure assets typically have higher barriers to entry to the market, inflation-related revenues easily mapped to future cash flows. These cash flows are less cyclical in nature in view of the nature of the asset. In turbulent times, people will continue to use the roads and airports and still consume the same amount of water and electricity. Defensive case also was helped by the fact that infrastructure companies are traditionally less exposed to the downside of volatile markets.

From the point of view of growth, these companies can also see some advantages. As the economy improves these assets, as a rule, for which the company manages. One widespread belief is that the stock market infrastructure, tend to outperform in the face of rising interest rates. This is due to the understanding that they act as proxies for the bond investment. They often pay attractive dividends, but may suffer as interest rates rise.

This concept stems from the associated increase in the cost of funding and believes that the stock market infrastructure often come with a high level of debt. There is some truth in these concepts, but in reality, the infrastructure firms are often well protected in the event of a surge of inflation. Similarly, if the yield on a real bond to move up, most infrastructure companies have mechanisms that will lead to higher prices.

Finally, any infrastructure company is coming to the end of the cycle, capital investments – strong balance sheet – will be more efficient due to the previous raise funds at very attractive prices and the need for less funding in the future. The other main risk of the sector political and regulatory intervention. This can be mitigated by the selection of companies in countries with accountable institutions and a strong legal system legal protection in the event of political interference.

As you move to higher speed, higher inflation, more volatile environment, the stock market infrastructure begins. It has become evident over the past two months with the most effective sectors of utilities, telecommunications and real estate. Long term this is also true.

Since 2002, the Dow global infrastructure Jones Brookfield has a yield annualized 11.92 PC with the S&P500 in return of 9.96 PC a year over the same period. This was achieved also with lower volatility. We believe that it is useful to have some exposure of infrastructure in portfolios at all times, even in wild bull markets. But its relative price accelerated at a moderate or bear markets. For investors who want to allocate in this sector there are some companies with strong fundamentals, attractive dividends and a very capable management. There are also many very good ETFs and actively managed funds are led by experienced professionals of the sector.

William Heffernan-senior research analyst Cantor Fitzgerald (cantorfitzgerald.t. E.)

Any investment review in this column the Author directly and should not be construed as recommendations from the Sunday independent

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