Positive long-term outlook for infrastructure: Zenith

Development of new infrastructure projects across a range of developed and emerging markets makes the longer-term investment outlook for infrastructure positive, according to a Zenith Investment Partners sector review.

The review also bases its outlook on ongoing demand for infrastructure investment, increasing involvement of the private sector and the increasing appetite of investment groups for infrastructure assets.

Another factor is that the US lags the other developed markets in the privatisation of infrastructure assets and therefore provides strong growth potential within the asset class.

The relatively unique nature of infrastructure provides some attractive advantages, according to Zenith Investment Partners director David Wright.

Revenues and cash flows are often more predictable and better insulated from economic slowdown than general industrials, he said.

Many infrastructure asset revenues are regulated, he said, and are therefore set in advance by governments based on either a return on capital or a contracted equity return.

Given the quasi government guarantee of revenues and returns, infrastructure companies are more likely to be able to access borrowings and grow assets even if the current credit conditions continue.

As economic conditions have worsened, many governments have ramped up infrastructure projects to provide employment and support the broader economy, Wright said.