Shifting sector paves way for infrastructure

In a ‘lower for longer’ climate, infrastructure is standing out as an alternative income stream as banks are phased out of financing.

Perpetual research analyst David Blunt says opportunities for the infrastructure sector have soared in the post-GFC investment environment.

“One of the big structural shifts we’ve seen since the GFC has been restriction on the ways banks can allocate their capital. This has meant there’s been reluctance by banks to provide long-term financing to things like real estate development and infrastructure development,” Mr Blunt said.

“There’s a number of intermediaries who are prepared to provide finance to big projects, either as a single loan or as a syndicate of loans to these infrastructure projects and we’re able to attract five to six per cent yield from that and we’re finding attractive investments in Europe and North America.”

With historically low interest rates, investors are looking for alternatives to the volatile equity market and infrastructure is servicing that need.

According to Vanguard’s 2016 investment trends report, almost a third of SMSF planners said they intended to invest in infrastructure over the coming 12 months.

While project finance has typically been considered a riskier investment sector, infrastructure projects can often be safer, according to Mr Blunt.

“Infrastructure assets are effectively backed by governments so they’re in the government’s interest to get them up and running and online for their societies making them a relatively safe bet versus other types of finance,” he said.

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