Infrastructure: Let’s go buy a port

by Chris Andrew
Infrastructure: Let’s go buy a port

If someone asked you what investment you wanted to own that could beat inflation in the long run, would you say ‘a toll road’ or ‘a port’? Many do not believe they can actually invest in these infrastructure assets, even with a small sum. 

During the 1990s, UK government turned to the private sector to help build different infrastructure projects under the ‘Public Private Partnership’ or PPP initiative. Specialist funds have been set up to invest in infrastructure projects. The infrastructures assets are owned by these funds, and investors receive long-term contracted payments from the government that are partially or fully inflation-linked. Furthermore, the value of the actual physical assets can go higher, allowing for some capital growth.

Examples of such funds include HICL Infrastructure, International Private Partnerships and John Laing Infrastructure. All these investments have performed well over the last decade, providing an average yield of 4-5% pa (source: Bloomberg).  

Obviously, there have been both successes and failures in PPP. Could a political party come to power with wishes to re-nationalise certain industries? Certainly. Is it likely they will be able to find sufficient funding to re-nationalise every single asset since the 1990s? Absolutely not, especially for those who have been successful.

As with every investment, research is needed before making your decision. This is what the investment team at Reyker does for you. The inflation-protected income potential and low correlation with other assets means infrastructure remains a critical ‘real asset’ in our Real Asset managed portfolio.