Investors should consider investing in global infrastructure if they want to be protected from the effect of inflation and falling consumer spending that can strike equities, according to the portfolio manager of Magellan Asset Management Infrastructure Fund Gerald Stack.
Speaking at a presentation about Magellan’s global infrastructure fund, Stack said infrastructure assets differed from other asset classes in that they remained highly priced, flexible and protected from inflation. Therefore, they would outperform even when the share market was not performing.
Most people didn’t think of infrastructure as being a large part of the investment universe, but at approximately US$1 trillion it is significantly larger than real estate investment trusts, Stack said.
Stack said the underlying demand for global infrastructure was stable, and the global need for infrastructure remained in the trillions of dollars.
“Infrastructure and utilities provide essential services, you just can’t get around them … and they’re protected from inflation … so they’re much less volatile than equities,” he said.
Earnings ratios also continued to grow through the worst economic conditions, he said.
However, Stack warned his audience not to restrict themselves to Australian infrastructure, as the domestic market was much more highly geared than the rest of the world — and the demand for new infrastructure in Australia, such as toll roads, might be uncertain.
He also warned that investors had to hold infrastructure assets for the long term, and not rely on month-to-month returns.
