Infrastructure investments attractive in rising rate cycle
During a rate rise cycle many sectors, such as consumer discretionary, will be expected to suffer while infrastructure companies are in a unique position to benefit, according to ETF Securities.
Also, in a rate rising cycle investors could become more concerned that the yields would be less appealing compared with risk free cash however it was a second component of infrastructure investing, its capital growth that would make these investments attractive
Many infrastructure companies were expected to grow helped by their pricing power.
What is more, firms that are heavily regulated could expect the benefits of the economic growth that was pushing yields higher to provide a longer-term benefit that outweighed the immediate negative impact of higher rates, ETF Securities said.
Additionally, on the cost side, infrastructure companies would tend to have lower than average debt-to-equity ratios and those firms that raised significant debt financing were likely to have hedged some of their repayment liabilities against rising rates.
Infrastructure spending was set to increase in 2018 driven by Chinese investments and President Trump’s $1.5 trillion package of infrastructure spending.
Exchange rated funds (ETFs) were the easiest and cheapest ways for investors to access this sector and often performed better than the more traditional active managers covering the same theme, according to ETF Securities.
AUTHOR
Oksana Patron
Recommended for you
Record flows into iShares ETFs helped BlackRock’s assets under management reach US$13.5 trillion in the third quarter, but it reported outflows from the APAC region.
Regal Partners has passed $20 billion in funds under management, helped by $723 million in net inflows during the last three months.
Global investment manager Fidante has formed a strategic partnership with a London-based asset manager to secure exclusive distribution rights across the APAC region.
Blackwattle Investment Partners has hired a management trio from First Sentier Investors – who departed amid the closure of four investment teams last year – to run its first equity income offering.
