Infrastructure gains from falling interest rates

Article Excerpt

Companies that own and operate unique infrastructure assets have characteristics such as stable profits and cash flows that make them attractive to long-term investors. And investors seeking exposure to these assets have several publicly listed options, including ETFs. Indexes that track the performance of listed infrastructure companies have performed as well as the broad global equity markets over the long term; they have also experienced similar or lower volatility than the markets. However, the returns of these companies have lagged over the past few years. That’s in part due to higher interest rates. Elevated rates add to the appeal of fixed-income investments over the steady cash flow and dividend yields offered by infrastructure stocks. What are infrastructure assets? Infrastructure provides the physical backbone that delivers essential services to the public. This includes pipelines, plants that generate electricity, transmission lines, railroads, ports, airports, communication infrastructure, and toll roads. Infrastructure can be categorized into two areas: regulated assets and user-pay assets. With regulated assets, such as…