Smaller investors, who have largely been excluded from unlisted infrastructure assets, are showing interest in increasing allocations to that asset class, according to independent funds management group Infrastructure Partners Investment Fund Management (IPIFM).
One of the reasons for that is that low interest rates and term deposits, coupled with equity market volatility, is forcing smaller investors to look for new ways to generate returns, beyond their traditional allocations to Australian equities, cash and property.
At the same time, unlisted infrastructure provided reliable long-term income and capital gains thanks to its stable cash flows from diversified assets such as airports, seaports, power generation and utilities, the firm said.
Additionally, according to IPIFM’s executive director, Nicole Connolly, these returns historically returned nine per cent per annum plus, which was more than the yields from Australia’s top dividend stocks, including the big four banks, and well above the rates of term deposits.
“Couple this with the recent uncertainty over the future of franking credits and dividends and it is little wonder that more investors are increasingly considering the predictable and consistent returns of unlisted infrastructure. All without the associated market volatility of listed investments,” she said.
Also, the Australian market offered significant opportunities for private investment in infrastructure.
“Australia’s governments are facing increasing fiscal gaps as the population ages. In addition, our capital cities are expected to grow by 11.8 million people in the next 30 years. Unlisted funds with strong institutional capital support are well placed to take advantage of this opportunity,” Connolly said.
“This, coupled with the growth of superannuation expected to triple by 2035, will see the demand for unlisted infrastructure from investors rise further, in particular from smaller investors.”
IPIF Core offers its flagship fund which was designed for high-net-worth individuals, self-managed super funds (SMSFs) and smaller institutional investors.
As at 30 June 2018, IPIF Core has delivered performance of 9.2 per cent per annum since inception in January 2016 and attracted more than $115 million in funds under management.