Investing Beyond the Mainstream: Infrastructure

Australian Financial Review, October 2016

Industry super funds and the sovereign Future Fund love infrastructure. So do their peers around the world. It’s a perfect asset class for them: stable, predictable, generating yield over a period of 20 years or more. For a pension fund, which has to think about its assets and liabilities over multi-decade timeframes, that’s perfect; for a sovereign wealth fund, even better. That’s why the Future Fund had 6.7% of its portfolio in infrastructure and timberland as of June 30, one of the highest such allocations in the sovereign wealth sector worldwide.

But what about you? Can you act like a super fund and buy your own little bit of highway? Infrastructure is an accessible asset class for retail investors, albeit in a slightly different way to the way institutions buy it, and it has the same attractive themes of yield and steadiness for you as it does for the big end of town.

It has, though, had quite a run. Vanguard’s Global Infrastructure Index Fund, for example, is up 8.88% year to date to September 30 (9.28% gross), and has delivered 14.03% (14.59% gross) a year over three years and 13.23% (13.78% gross) over five, assuming all income distributions are reinvested.