[GRTV] The benefits of global infrastructure

Barely a day goes by without infrastructure being in the news. Often though these stories don’t talk about the investment case of infrastructure.
Last week Sydney-based Resolution Capital portfolio managers Jan de Vos and Mark Jones where in New Zealand talking to advisers about the global infrastructure fund they run.

Infrastructure is a “very defensive asset class,” Jones says, and it is in “a strong growth cycle. There are lots of reasons for this including AI, data centres, electrification, and transport to name a few.

He says over the past 20 years listed infrastructure has had only one year of negative earnings growth – and that was the Covid-19 pandemic when there were no cars on the road and few planes in the sky.

Apart from that the earnings growth has been more or less consistent. It’s averaged around 8 to 9%. And we think that earnings growth is going to be low double digits.  Earnings growth tends to correlate to investor returns. So, if you are getting investor returns of high single digital, low double digits plus a dividend…it really is quite an attractive total return profile.”

Jones says the number one feature of global infrastructure is that it is an inflation hedge.

One of the big investment themes talked about currently is AI and datacentres. For an infrastructure investor like Resolution Capital these areas provide a compelling case for investing, along with electrification.

The beauty for a fund like this is that it’s not an AI play and whether the products will be successful. Rather it’s about long-term investing in assets players like Google and Meta are investing in.

The investment is not about the success of the AI products they develop. Rather they are making long term investments in the physical infrastructure which will deliver a return for infrastructure investors like Resolution Capital.

Resolution Capital takes an active approach to investing and is style neutral.

Jones says the risks around infrastructure are social risk, that is governments moving against yo or poor governance from management As active investors they try to avoid these risks will passive funds “hoovers them all up.”

“As an active fund manager we try to avoid those risks.”

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