- Global Industry Analyst
- About Us
- My Account
The views expressed are those of the author at the time of writing. Other teams may hold different views and make different investment decisions. The value of your investment may become worth more or less than at the time of original investment. While any third-party data used is considered reliable, its accuracy is not guaranteed. For professional, institutional, or accredited investors only.
Mention the term infrastructure and you are likely to catch the attention of the more experienced investor. Infrastructure is the lifeblood of modern economies and offers a growing range of investment opportunities across public and private markets. While private markets have expanded significantly, we think that for most investors the more accessible public market should still be the first port of call. Why? The listed infrastructure universe offers a wide array of attractive opportunities across sectors and regions, many of which are not available through private markets. And while investment in infrastructure is intrinsically aligned with a longer-term approach, investors do not have to forgo liquidity or regular price transparency as is the case in private markets.
What we find particularly appealing about listed infrastructure is the ability to invest in what we call “enduring assets”, that is to say, companies that:
Another key feature of these enduring assets is their structural exposure to secular trends — such as the rise of data or decarbonisation — that have the potential to transform entire societies and economies.
Undoubtedly the most important of these transformational trends is the drive towards decarbonisation in response to accelerating climate change. Investing in renewable energy infrastructure such as wind and solar power is the most obvious avenue for getting exposure to this systemic shift, but we believe investors need to be mindful that valuations already reflect much of the associated upside. Moreover, the growth in renewable energy generation only reflects part of the opportunity set. We think regulated electricity utilities offer an attractive, alternative way to invest in the energy transition, given the central role of electrical networks in the new economy, where everything from transport to heating and data storage will be run on electricity. Infrastructure businesses are, by definition, capital intensive. So, all else equal, the higher the future capital investment, the greater the future growth potential. In the case of electricity, the scale of future capital investment is exceptional as trillions of dollars will need to be spent over the next 20 years to modernise and transition the electricity grid away from fossil fuels. Notably, the International Energy Agency estimates that over the next 20 years, electric networks and renewable energy will require US$517 billion and US$585 billion of annual global investment, respectively (Figure 1).
As we expect this trend of increased investment to be secular, not cyclical, this could translate into higher prospective earnings growth rates for electric utilities for decades to come. In our view, the current valuations of electrical utility equities offer a good entry point for investors seeking to benefit from this future growth potential and contribute to the decarbonisation both of their portfolios and the wider market. As discussed in our 2022 equity outlook, we believe experienced active investors can take this potential even a step further, by identifying those utilities that appear currently behind the curve but that have significant scope to accelerate their transition.
Is the long-awaited change in Japan’s fortunes finally materialising?Continue reading
Thematic investing focus: The education imperativeContinue reading
Why investing in themes for EM equities may reap rewardsContinue reading
Small-cap value: Strong past, bright future?Continue reading
Thematic investing focus: The future of foodContinue reading
Investing at the biopharma frontier
Rebecca Sykes details groundbreaking innovations happening today in the biopharmaceutical industry. She explains key advancements and the investment landscape for therapies targeting diabetes, cancer, and Alzheimer's disease, three of the deadliest and most expensive diseases facing the world today.
How a thematic approach can help harness change within portfolios
Multi-Asset Strategist Supriya Menon and Investment Director Andrew Sharp-Paul discuss why a thematic approach can help harness change within portfolios against a structurally different macroeconomic backdrop.
Thematic investing focus: Cloud-backed AI and enterprise intelligence
Cloud-based computing and artificial intelligence are transforming the way enterprises operate, creating what we believe will be a secular tailwind for companies providing software, machine learning tools, and cybersecurity.
Is the long-awaited change in Japan’s fortunes finally materialising?
Portfolio Manager Dan Maguire explores why Japan may finally be exiting deflation and assesses the opportunities this structural change could create for small- and mid-cap equities.
Thematic investing focus: The education imperative
Education is poised for transformation — and set to see a decade of spending and growth we believe will be unmatched by any since the post-World War II boom.
Why investing in themes for EM equities may reap rewards
Portfolio Manager Dáire Dunne outlines why he is increasingly optimistic about the potential opportunities within select EM equity themes this year.
Small-cap value: Strong past, bright future?
While equity markets have had a challenging recent past, history teaches us that there may be several reasons to be optimistic about small-cap value.
Thematic investing focus: The future of food
The global food system has reached a tipping point and change is coming, creating investment opportunities aided by demographic, policy, and innovation tailwinds.
Thematic investing focus: The transportation revolution has arrived
New technology and environmental concerns are creating a disruptive force in the transportation sector, leading to supply-chain investments and a host of new addressable markets.