Global listed infrastructure could provide an inflation strategy but it is important investors realise the differences between funds, according to Morningstar.
According to Morningstar's Sector Wrap-Up for global listed infrastructure funds, the inflation-fighting abilities of the assets are not fool-proof and investors should still undertake due diligence.
"It's important to realise that the actual universe of infrastructure companies can vary quite dramatically and so it's important not to categorise all of them as the same," Morningstar senior research analyst Tim Wong told InvestorDaily.
"As noted, academic research tends to indicate that companies with the greatest pricing power within the universe tend to be able to best withstand inflation over time."
Morningstar said that as global listed infrastructure often operates as a monopoly in its sector, it has a superior ability to pass inflationary cost to consumers through its high degree of pricing power.
The research said regulation can often enable this trait with some contracts for utilities having inflation increases built into the agreements.
Morningstar said that while global listed infrastructure has delivered relatively steady dividend yields at the company level that have exceed other equities, this return is subject to change.
"What we've found over time is that at the underlying company level, if you look at the dividend yields of the companies that these portfolios hold, they have been above the average global equities fund," Mr Wong said.
"The issue that comes around - which is symptomatic of all unit trusts - is that many of these global infrastructure funds are currency hedged and so changes in the value of the Australian dollar in respect to other currencies can quite significantly affect the actual distribution that unit holder ends up receiving."
