We believe future prospects are also good, despite some negative sentiment stemming from the Labour Party’s proposed nationalisation plans, which could include many regulated and infrastructure assets. We believe this eventuality remains a very low probability as polls suggest Labour would not get a majority in Parliament even if there were an election today, despite the crisis in the Conservative Party. Labour would then have to find several hundred billion pounds to carry out their nationalisation plans, at the same time as promising a massive amount of new funding in health and education. Borrowing might be cheap now but with that level of spending on the cards, we doubt lenders in the gilt market would be so accommodating.
In summary, beyond some seemingly remote political risk, we believe that the outlook for infrastructure investments generally appears positive, with strong yields and high quality, more predictable revenue streams. Moreover, its low correlation to equities makes it a great portfolio diversifier.
* Source: Bloomberg as at 14 June 2019 ICE BofAML Sterling Non-Gilt Index.
** Source: Bloomberg 24 March 2006 to 31 May 2019.
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