Alt Investments

New Research Reveals Growing Role Of Infrastructure In Client Portfolios

Amanda Cheesley Deputy Editor 2 April 2024

New Research Reveals Growing Role Of Infrastructure In Client Portfolios

Research from TIME Investments with 200 UK wealth managers, financial advisors and investment analysts, has just been released, highlighting the growing importance of infrastructure in client portfolios and the key drivers behind this trend.  

A large majority (92 per cent) of clients with more than £200,000 ($253,000) of investable assets now have an allocation to infrastructure, according to research from UK-based TIME Investments, which specialises in asset-backed income-producing funds. The study highlights what appears to be a growing wealth and asset management focus on the asset class.

Seventy-one per cent of respondents said that their current target allocation range to the asset class is between 4 per cent and 6 per cent of their investment portfolio. Three quarters said that they expect allocation to infrastructure assets to increase over the next 12 months and 25 per cent expect it to stay the same.

When asked what is driving allocation to real assets such as infrastructure, the key factors cited by respondents are the desire to de-risk portfolios through diversification (68 per cent), increase focus on ESG (61 per cent), seek secure income streams (45 per cent), and establish defensive investment strategies (44 per cent).

There has been a trend of firms buying into the $1 trillion infrastructure story, such as BlackRock and Vontobel in recent weeks (see stories here and here.) BlackRock has said infrastructure is forecast to be one of the “fastest growing segments of private markets in the years ahead,” buoyed by a need for upgraded fibre broadband, cell towers and data centres; renewed investment in logistical hubs such as airports, railroads and shipping ports as supply chains are rewired; and a movement towards decarbonisation and energy security. 

The TIME research also highlighted the infrastructure sectors respondents felt offered the greatest investment opportunities over the next 12 months. Digital infrastructure and social infrastructure were seen as offering the greatest potential by 78 per cent and 71 per cent of respondents respectively, followed by renewables, healthcare, education and transport.

The research was conducted by Pure Profile in September 2023 with 200 UK wealth managers, financial advisors, discretionary fund managers, fund selectors, and investment analysts, 68 per cent of whom work for firms with £100 million to £1 billion of assets under management and have clients with minimum investsble assets of £200,000.

“Our research shows that asset allocations to infrastructure are set to increase over the next 12 months. This is predominantly being driven by diversification and the desire for secure income streams as investors try to weather the economic challenges,” Andrew Gill, co-fund manager of the TIME:UK Infrastructure Income Fund, said.

“Economic performance can have a greater impact on different sectors depending on the make-up of their income streams. Global economic growth, including the UK and Continental Europe, is expected to be weak in 2024 and sectors that rely on persistent or growth in demand could be impacted,” Gill added. He prefers sectors that have a higher degree of availability-based revenue, effectively as long as the asset is operational, income will be received. 

“Whilst political risk is elevated in a general election year, UK infrastructure looks well supported by the two main Westminster parties,” he continued. “UK public debt remains highly elevated and though infrastructure has been an easy target for spending cuts, such as in the early 2010s, there seems to be a greater understanding of the need for continued, well-targeted infrastructure investment.” 

The TIME group manages over £1 billion of high-quality asset-backed and listed infrastructure securities across several asset types. TIME, which is part of the Alpha Real Capital Limited Group, has over £4.5 billion of assets under management. Most of these assets are in defensive and secure income real asset strategies. 

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