Seven Investment Management is the latest business to jump on the infrastructure bandwagon, with deputy chief investment officer Alex Scott saying infrastructure investment could be an answer to the problem of managing cautious portfolios in a low-interest rate environment.
Mr Scott said that the group has been building up positions in the infrastructure sector for the last two months in its Cautious, Unconstrained and Personal Injury funds.
“Our re-entry into the infrastructure investment company sector is a reaction to the environment we now find ourselves in,” he said.
Our re-entry into the infrastructure investment company sector is a reaction to the environment we now find ourselves in.Alex Scott“While bonds have delivered stunning returns over the last few years, the issue of how to manage cautious portfolios in a low interest rate environment, and when bond income just isn’t there, is one of the fundamental issues facing fund managers.
“Managers of cautious portfolios need to be looking at assets that can still offer interesting returns while limiting overall portfolio volatility. For us, infrastructure investment companies can be part of that solution.
"We like the long term, predictable cash flows that infrastructure investment companies can offer, with a high degree of inflation linking and low economic market sensitivity, backed by public sector entities.
"Recent fund raisings in the infrastructure sector have offered an attractive entry point.”
Patrick Connolly, communications manager of financial advisers Chase de Vere, said although infrastructure investments can provide steady returns, “it would be wrong to assume that infrastructure is without risk”.
“There can be risks related to the construction and operation of infrastructure assets and the potential of economic, regulatory or political risks, all of which could impact on returns,” he warned. “Investment trusts can provide direct exposure to infrastructure projects although most are standing at significant premiums, while open-ended funds don’t tend to give direct exposure to infrastructure projects.”
The political climate has led to rising interest in infrastructure.
President Donald Trump announced a huge infrastructure programme in his presidential acceptance speech, while chancellor Philip Hammond’s Autumn Statement also announced an infrastructure spending programme.
Miton launched an infrastructure fund with an estimated yield of 4 per cent earlier this year.
rosie.murray-west@ft.com
