Is listed infrastructure insulated from the end of a market cycle, and if so, to what degree? RARE’s co-chief investment officer, Nick Langley, explains the market drivers for these stocks.
Airports, electrical plants, gas pipelines, rail and roads provide essential services. The relatively predictable nature of the demand for such assets means the market price of the companies that manage them can act differently to other equities.
Because they impact trade flows, tariffs have implications for port, road and rail systems. This could end up stimulating investment in new infrastructure capabilities.
The fortunes of individual global infrastructure companies will be driven by three key themes in the year ahead. Nick Langley and Richard Elmslie, Co-CEOs and Co-CIOs of RARE Infrastructure, explain the risk and opportunities to companies for each of these themes and give their general outlook for 2018.
Investing in infrastructure can be one of the most direct ways of capturing emerging markets (EM) growth. With improved regulation and a growing amount of assets, EM companies are an increasingly attractive part of the global listed infrastructure universe. Charles Hamieh, Senior Investment Analyst and Portfolio Manager at RARE Infrastructure explains the scope of the sector.
Chart of the Week
Chart Courtesy of Western Asset Management. Source: U.S. Bureau of Labor Statistics, as of Nov 30, 2018. Past performance is no guarantee of future results. Indexes are unmanaged, and not available for direct investment. Index returns do not include fees or sales charges. This information is provided for illustrative purposes only and does not reflect the performance of an actual investment.
Chart of the Week
China’s growth figures were unexciting, but the trade picture may be improving; U.S. consumers spent well in November; Mario Draghi stuck to the ECB’s plan, but didn’t sound cheerful about it.
With the rise of air travel, airports have become essential to the functioning of societies. RARE Infrastructure makes the case for investing in listed companies that own airports.
Listed infrastructure opportunities
The Chinese Government’s ‘One Belt, One Road’ initiative is a foreign trade policy and economic strategy to develop the historic Silk Road trade route from China to Europe. RARE assesses the opportunities for investors in global listed infrastructure.
Rising bond yields can have a different impact on the fundamental valuation and market price of regulated utilities and user-pay infrastructure. An in-depth understanding of these impacts enables an active, benchmark-unaware manager to better navigate through the economic cycles.
Infrastructure stocks have been the one of the hardest hit sectors of the equity market over the past five months. It is our view that sentiment and not true fundamentals have caused much of this impact. But such sentiment is reversible given long-term fundamentals for infrastructure, with large investors now seeing multiples here at attractive valuations.
In this Q&A, Richard Elmslie, Co-Chief Investment Officer and Co-Chief Executive of RARE Infrastructure, explains the growth potential for infrastructure assets over the next decade and their resilience in the face of future downturns.
Global Listed Infrastructure
Select emerging market (EM) companies are an increasingly attractive part of the global listed infrastructure universe. When added to a portfolio of developed market stocks, EM securities offer a greater source of income and differentiation in returns.
More spend on airports, roads, rail and water is likely to flow from the Trump Administration’s infrastructure reform. The acquisition of publicly owned assets by listed infrastructure companies is another potential outcome.
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