How ‘boring’ infrastructure assets provide value for retired clients

Amid market fluctuations and geopolitical tensions, Lazard Asset Management’s Warryn Robertson believes global listed infrastructure assets could be key to providing security for anxious clients.

Between Donald Trump’s so-called Liberation Day in April and the rapid market readjustment that occurred in its wake – heightened geopolitical risks, sticky inflation, and an uncertain macro-economic environment – Robertson said advisers have been forced to contend with ongoing volatility this year.

However, as advisers and portfolio managers readjust clients’ investments to ensure they still meet their goals, Robertson, global listed infrastructure portfolio manager, told Money Management the asset class has a role to play in providing reliable returns and reassurance during ongoing market fluctuations.

Namely, he said that this asset class is particularly valuable for wary clients who desire an added sense of security during uncertain times.

“If you’re cautious around things like inflation becoming sticky and the genie not being truly back in the bottle, if investors and asset allocators are wary about what that means in terms of the way they allocate to various asset classes, then infrastructure becomes quite an attractive investment destination,” Robertson said.

While big performers, such as technology firms Nvidia or Meta, offer investors the opportunity for large returns, Robertson said that global listed infrastructure, when defined correctly, can provide “predictable, very boring outcomes”, introducing greater stability into a portfolio.

“If you’re a financial planner and you’re building a portfolio for clients and you’ve got bonds and cash and term deposits down the low end, and that is where you’re looking at somewhere between three, four, five per cent returns,” Robertson said. 

“You’ve then got your listed equities, and you might venture into things like private equity and a few other funky stuff like that. That’s around 10 per cent plus [returns].”

The space in between, Robertson said, could then be filled with property or infrastructure assets. 

“Infrastructure has more monopolistic characteristics, if you define it correctly, but it sits in that void between bonds and equities and term deposits and where Australian equities would trade,” he added. 

“It’s lower risk, but higher than traditional equities, higher returns than what you would get out of a term deposit or your bond investments. And I think that strategically means they’re important assets to consider throughout an investment lifecycle.”

When it comes to what he and Lazard consider to be an ideal infrastructure asset, Robertson said they look to monopolised assets that form the “backbone of society”, such as toll roads, electric utilities, satellites, phone towers, and power lines, which will remain relatively stable regardless of the economic environment.

These assets tend to generate returns around 6–7 per cent per annum, according to Robertson, making them well-suited to clients in the pension phase as they offer both high income potential, while still having growth characteristics.

As to why now is a good time to consider infrastructure assets, Robertson said that, due to ongoing geopolitical and macro-economic risks, “buying simple, boring infrastructure assets makes good strategic sense in the long run”.

“There’s some compelling reasons to genuinely consider it today on a relative basis. They do look relatively cheaper than they have done at many times over the last 15 to 20 years. There’s probably only been a handful or less opportunities in 20 years where infrastructure looks relatively as cheap against general equities as what it does today,” Robertson said.