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Ursula Tonkin

Defensive equity: Listed infrastructure vs property REITs

By Ursula Tonkin and Ayaz Memon
5 minute read

When most Australians think of defensive assets, they think cash or maybe fixed income. But there are other defensive alternatives that have offered higher returns than even global equities with, very importantly, relatively less risk than global equities.

Global listed property REITs and listed infrastructure are considered defensive, income-generating equities, offering a high dividend yield, underpinned by stable inflation-linked cash flows, and diversification from global equities. They are, essentially, a more liquid proxy for real assets.

Core infrastructure assets, such as electricity grids and toll roads, have reliable and predicable cash flows, with inflation-linked revenues.  Investors in global listed infrastructure, particularly listed core infrastructure have enjoyed superior risk-adjusted returns relative to global listed property REITs over the past decade. 

In addition, core infrastructure provided better downside protection in falling equity markets as well as better diversification to global equities than listed property stocks. 


Listed property and listed infrastructure have different risk and return profiles, so allocation to these assets should be considered separately, and there is room for both in a diversified portfolio.

Similarities and differences

Listed infrastructure and listed property are mature and deep markets with a market capitalisation equivalent to approximately 10 per cent of the MSCI World Index – the global equity index representing the largest 1,632 stocks across 23 developed markets.

Both provide predictable, inflation-linked cash flows that are a good diversifier due to their relatively low correlation to global equities.

Table 1: Asset class overview


Listed property REITs

Listed infrastructure


Commercial buildings

Office buildings

Industrial buildings

Residential buildings

Electric and gas grids

Water utilities

Communications towers

Toll roads




(developed markets capitalisation)

USD$1.6 trillion

4.3% of the MSCI World Index market capitalisation

USD$2.0 trillion

5.4% of the MSCI World Index market capitalisation

Dividend yield



Inflation linkages

Moderate to strong


Average contract or concession life

3 to 7 years

5 to 15 years


High, 5.9x debt to EBITDA

High, 5.3x debt to EBITDA
















While listed property has performed strongly over the past decade, listed infrastructure has outperformed, particularly core infrastructure, when looking through lenses such as return, volatility and downside protection.

Table 2: Risk-adjusted returns over 5 years





Risk-adjusted return

Downside capture ratio

Listed core infrastructure





Listed infrastructure





Listed property





Global equities





Dividend yield

For investors seeking income, listed property provides a consistently higher dividend yield compared to listed infrastructure and global equities. Many listed property companies are required to pay most of their income in distribution to their shareholders, and thus have very high payout ratios.

During the period from 2006-18, listed real estate companies generated 65 per cent of their total returns from the income component.

Downside protection

All asset classes experienced massive drawdowns during the GFC. But for core infrastructure, the magnitude of negative returns was smaller, and the recovery time quicker, compared to other asset classes. Listed infrastructure dropped 31 per cent from its peak to trough during the GFC and took 22 months to recover. Global equities lost 51 per cent of their value and took nearly four years to recover. But the listed property sector suffered the biggest drawdown, dropping 68 per cent from its peak and taking more than five years to recover.


Diversification is one of the key considerations for long-term investors when investing in real assets. Defensive equities like listed property and listed infrastructure can reduce overall portfolio risk if they are sufficiently diversified from global equities. Otherwise they will simply add more equity beta to the portfolio. For infrastructure, this is why applying a clear and consistent definition is so important, and not straying into more industrial and infrastructure-like sectors.

Equity market beta

Infrastructure stocks have consistently maintained a beta of less than 0.6 in our analysis, meaning they are less volatile than the overall equity market. In contrast, property REITs have a long-term average beta of 0.9 and carried a beta greater than one in the aftermath of the GFC until 2013, with this now dropping to below one.


With many forecasters expecting market volatility to increase into 2020 and beyond, the defensive characteristics of listed infrastructure and listed property are appealing. Listed infrastructure in particular, has consistently outperformed global equities over the past decade. There are, however, different definitions of what “infrastructure” is, and investors with a focus on the defensive characteristics should consider looking for “core” or conservative definitions. Given the less than perfect correlation between listed property and listed infrastructure, there is certainly room for both in an investor’s diversified asset portfolio.

By Ursula Tonkin (portfolio manager) and Ayaz Memon (portfolio analyst), Whitehelm Capital