The passage by the US Senate of US$1 trillion infrastructure bill has provided a considerable boost to infrastructure as an asset class which is now expected to outperform the MSCI World ex Australia index by three percentage points per annum over the next three years, according to VanEck.
The Bipartisan Infrastructure Deal, described as a once-in-a-generation investment in the US infrastructure, would include US$550 billion in federal investments in America’s infrastructure.
According to VanEck, this followed a number of other initiatives worldwide signalling increased infrastructure spend earlier to accelerate the recovery from COVID-19. The other initiatives included Europe’s Next Generation recovery fund, Australian’s series of spends while China had already in place the Belt and Road Initiative which was one of the world’s largest infrastructure program.
Jamie Hannah, VanEck’s deputy head of investments and capital markets, said that the US Senate passing the US$1 trillion infrastructure package with broad bipartisan support would advance US President Biden’s economic agenda and critical investment in US roads, bridges and rail and it was estimated that some US$94 trillion would still need to be spent globally by 2040 to address the world’s infrastructure needs as populations grow and change.
“This spending boost will greatly benefit existing infrastructure companies as they are best placed to win new contracts, take on more responsibilities and help drive the build of the new projects and the global economic recovery. This will likely see the sector outperform strongly,” he said.
“The sector has not fully recovered from COVID-19 as operators such as airports still drag on the sector’s performance. But over the medium term, life will return to normal, and these critical assets and projects will benefit, driving the performance of infrastructure companies.”
Performance of the MSCI ex Australia index vs. the FTSE Developed Core Infrastructure 50/50 Hedge over the last five years
Source: FE Analytics