With global interest rates falling, returns out of historically ‘safe’ asset classes, such as cash and bonds, are not considered a sensible option going forwards, according to one leading institution.
Colonial First State Global Asset Management (CFSGAM) said that in the past six months there has been a shift for investors to think about alternative ways to access income without adding significant risk.
“I think that is where infrastructure can come in because it is giving you the same yield you get with term deposits now, and we’ve got capital optionality, which translates to 15 per cent total return over the past three years,” said CFSGAM head of global listed infrastructure Peter Meany.
“I’m not guaranteeing that for the next three years but you want to expose your portfolio to that side given the valuations and expectations around the world that there is potential for surprise on the upside,” he said.
Consistent and growing dividends from infrastructure will become more attractive relative to cash and bonds. Growth sourced from structural change will stand out during an extended period of de-leveraging for the broader economy, according to the group.
Mr Meany also explained that demand from pension and sovereign wealth funds will result in further takeovers of listed infrastructure stocks.
“I think the growth story is really starting to bite. Investors are starting to get the message that there is growth in the infrastructure sector that they didn’t expect,” Mr Meany said.
“There is still very much a focus on income, low volatility and transparency. I think there has been a real back-to-basics mentality which is healthy,” he said.
Despite difficult market conditions since its launch in 2007, CFSGAM’s global listed infrastructure fund has outperformed its benchmark by 20 per cent over the five years to 30 June 2012.
CFSGAM manages over $1.3 billion in the asset class, having more than doubled funds under management in the last 18 months.
