Invesco White Paper Series: Investing in Infrastructure
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Investing in infrastructure:
What you should know about
this growing asset class
Contributor:
Darin Turner
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Executive summary
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How infrastructure is defined
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Figure 1: Infrastructure asset class characteristics
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Figure 2: Investors’ intentions for their
infrastructure allocations in the longer term (%)
Figure 3: Investors’ intentions for their
infrastructure allocations today (%)
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Figure 4: Average current and target allocations to infrastructure over time, 2011-2015
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The privatization of water systems in England and Wales
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Figure 5: Estimating the infrastructure needed for basic services
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Figure 6: Global infrastructure investment need is estimated at $89 trillion
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Figure 7: Grading US infrastructure: D+ with a $3.6 trillion spending gap
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$3.6 trillion
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So why global infrastructure?
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Figure 8: Growth of $10,000
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Figure 9: Infrastructure has historically provided attractive risk-adjusted returns
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Figure 10: Historically, infrastructure stocks have provided a hedge against inflation
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Figure 11: Global infrastructure provides stable cash flows with annual dividend growth
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Mitigating infrastructure risks with active management
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Conclusion
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Types of infrastructure companies
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Regulated assets
Gas/electric transmission and distribution: IGJ;HC?MÊNB;NÊIQHÊ;H>Ê
G;CHN;CHÊJIQ?LÊALC>MÊ;H>ÊNL;HMGCMMCIHÊJCJ?FCH?MÊILÊFCH?MÊNB;NÊ>CMNLC<ON?Ê
A;MÊ;H>Ê?F?=NLC=CNSÊNIÊ?H>ÊOM?LMŸÊ!;M?F?=NLC=ÊNL;HMGCMMCIHÊ;H>Ê
>CMNLC<ONCIHÊ=IGJ;HC?MƙÊGIL?Ê=IGGIHFSÊEHIQHÊ;MÊA;M?F?=NLC=ÊONCFCNC?MƙÊ
IQHÊ>?@?HMCP?Ê;MM?NMÊNB;NÊ;L?ÊL?AOF;N?>Ê;H>ÊI@@?LÊL?F;NCP?FSÊMN;<F?Ê
L?P?HO?MÊ;=LIMMÊ?=IHIGC=Ê=S=F?MŸ
Water and wastewater: IGJ;HC?MÊNB;NÊMNIL?ƙÊNL?;NÊ;H>Ê>?FCP?LÊQ;N?LÊ
MOJJFSÊ;H>ÊQ;MN?Q;N?LŸÊ!CP?HÊNB?Ê?MM?HNC;FÊH;NOL?ÊI@ÊNB?M?ÊM?LPC=?MƙÊ
Q;N?LÊ;H>ÊQ;MN?Q;N?LÊ=IGJ;HC?MÊIQHÊ@;CLFSÊ>?@?HMCP?Ê;MM?NMÊNB;NÊI@@?LÊ
L?F;NCP?FSÊMN;<F?ÊL?P?HO?MÊ;=LIMMÊ?=IHIGC=Ê=S=F?MŸÊ.B?SÊ;L?Ê;FMIÊ
L?AOF;N?>Ê;H>ÊN?H>ÊNIÊ?RBC<CNÊL?F;NCP?FSÊFIQ?LÊLCMEÊNB;HÊOM?LJ;SMÊÊ
ILÊ=IGJ?NCNCP?ÊCH@L;MNLO=NOL?Ê;MM?NMŸÊ
User-pays assets
Airports: IGJ;HC?MÊNB;NÊ>?P?FIJÊ;H>ÊG;H;A?Ê;CLJILNMƙÊCH=FO>CHAÊ
L?N;CFÊMNIL?MÊ;MÊQ?FFÊ;MÊ@II>Ê;H>Ê<?P?L;A?ÊM?LPC=?MŸÊCLJILNMÊ;L?Ê
=IHMC>?L?>ÊOM?LJ;SMÊ;MM?NMŸÊ.B?SÊJLIPC>?Ê;HÊOHL?AOF;N?>ÊM?LPC=?ÊÊ
;H>ƙÊNB?L?@IL?ƙÊN?H>ÊNIÊ<?ÊCGJ;=N?>Ê<SÊNB?Ê?=IHIGC=Ê=S=F?ÊQCNBÊNB?CLÊ
ALIQNBÊF?P?L;A?>ÊNIÊ!*Ÿ
Toll roads:ÊIGJ;HC?MÊNB;NÊ>?P?FIJƙÊG;H;A?ÊÊ
;H>ÊG;CHN;CHÊOL<;HÊNIFFÊLI;>MƙÊ;NÊNCG?MÊJLIPC>CHAÊ?MM?HNC;FÊ=IHH?=NCPCNSÊ
NIÊNB?ÊG;CHÊLION?MÊ;LIOH>ÊG;DILÊ=CNC?MŸÊ.IFFÊLI;>MÊ;L?Ê;FMIÊ=IHMC>?L?>Ê
OM?LJ;SMÊ;MM?NMƙÊQCNBÊALIQNBÊF?P?L;A?>ÊNIÊ!*Ÿ
Railways: IGJ;HC?MÊCHÊNB?ÊL;CFQ;SÊ=;N?AILSÊB;P?Ê?RJIMOL?ÊNIÊ@L?CABNƙÊ
=IGGI>CNC?MÊ;H>ÊJ;MM?HA?LMŸÊ,;CFQ;SMÊ;L?Ê=IHMC>?L?>ÊOM?LJ;SMÊ;MM?NMƙÊ
QCNBÊALIQNBÊF?P?L;A?>ÊNIÊ!*Ÿ
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Ports: IGJ;HC?MÊCHÊNB?ÊM?;JILNMÊ=;N?AILSÊB;P?Ê?RJIMOL?ÊNIÊ@L?CABNƙÊ
=IGGI>CNC?MÊ;H>ÊJ;MM?HA?LMŸÊ*ILNMÊ;L?Ê?=IHIGC=;FFSÊM?HMCNCP?ƙÊQCNBÊ
ALIQNBÊF?P?L;A?>ÊNIÊAFI<;FÊ!*ƙÊ;H>Ê;L?Ê=IHMC>?L?>ÊOM?LJ;SMÊ;MM?NMŸ
Competitive assets
Midstream services: IGJ;HC?MÊCHPIFP?>ÊCHÊNB?ÊA;NB?LCHAƙÊJLI=?MMCHAƙÊ
MNIL;A?Ê;H>ÊNL;HMJILN;NCIHÊI@ÊICFÊ;H>ÊA;MŸÊ'C>MNL?;GÊ;MM?NMÊ;L?Ê
=IHMC>?L?>Ê=IGJ?NCNCP?Ê;MM?NMÊ;MÊIJJIM?>ÊNIÊL?AOF;N?>Ê;MM?NMÊMO=BÊÊ
;MÊONCFCNSÊ=IGJ;HC?MÊQBC=BÊB;P?ÊL?NOLHMÊIHÊ?KOCNSÊM?NÊ<SÊL?AOF;NILMŸ
Logistics:ÊIGJ;HC?MÊCHPIFP?>ÊCHÊNB?ÊAFI<;FÊNL;HMJILN;NCIHÊ;H>ÊMNIL;A?Ê
I@ÊAII>MÊ<?NQ??HÊNB?ÊMIOL=?Ê;H>ÊNB?Ê=IHMOG?LŸÊ&IACMNC=Ê;MM?NMÊ;L?Ê
=IHMC>?L?>Ê=IGJ?NCNCP?Ê;MM?NMŸ
Telecom services: IGJ;HC?MÊNB;NÊIQHÊ;H>ÊIJ?L;N?Ê
N?F?=IGGOHC=;NCIHMÊCH@L;MNLO=NOL?ƙÊCH=FO>CHAÊM;N?FFCN?MƙÊQCL?F?MMÊNIQ?LMÊ
;H>ÊH?NQILEMŸÊ.?F?=IGÊM?LPC=?Ê=IGJ;HC?MÊIQHÊ=IGJ?NCNCP?Ê;MM?NMƙÊ
QBC=BÊ?RBC<CNÊAL?;N?LÊLCMEÊ<ONÊ;FMIÊCH=L?;M?>ÊIJJILNOHCNSÊ@ILÊALIQNBŸ
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About risk
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