The global infrastructure sector is set to receive $40 trillion in investment by 2030, driven by two key structural factors, according to VanEck.
In a whitepaper entitled Investing in global infrastructure, VanEck explain that an “enormous shortfall” in infrastructure investing over the previous 30 years, coupled with a growing global population, will push infrastructure sector growth.
“[The] substantial deficit in infrastructure assets will prompt governments around the world to invest considerably in infrastructure assets in the coming years,” said VanEck director of investments and strategy Russel Chesler.
[However], the defensive characteristics of global infrastructure securities are just as likely to drive private sector investment in the sector as a shield against ongoing market volatility,” he said.
VanEck cited figures from the 2015 Australian Infrastructure Audit that suggested city congestion could cost the Australian economy $53 billion by 2031 without significant spending.
“The audit also found that the improvements required cannot be sufficiently funded through institutional spending only and that a sustained fiscal response is required to combat current and future infrastructure deficits,” the company said.
This will benefit existing listed investment companies that are able to participate in large scale projects, the company said.
“Investors have been forced to allocate assets to riskier investments in a search for income. Global listed infrastructure provides a mid-range dividend yield, which is more stable than other equity yields,” Mr Chesler added.
Additionally, infrastructure securities are generally also long lived and protected by entry barriers, and typically have low correlation with other asset classes, Mr Chesler said.
“These factors make global infrastructure securities a compelling investment proposition for investors,” he said.
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