The most significant asset allocation change to client portfolios over the last 12 months has been rising exposure to infrastructure and alternatives, according to a study conducted among 200 intermediaries by Foresight Group.
Almost a third (31%) of advisers said client portfolios had been increasingly weighted towards alternatives in the past year of which infrastructure (11%) was the largest beneficiary. Fixed income accounted for the biggest fall in asset class exposure (16%).
The research highlights what advisers perceive as the three key advantages of infrastructure investing for their clients.
According to Bloomberg data from February 2019, the cumulative number of global listed renewable and infrastructure investment companies has increased from 37 (in 2010) to 91 in 2018. This marks a 146% increase over the course of eight years, supporting the growth of infrastructure as a means of providing stable and predictable returns.
The majority of advisers are looking to increase their clients’ allocation to infrastructure over the next three years.
The principal benefit of infrastructure, cited by 79% of advisers, is its low correlation to traditional assets such as equities and bonds; 75% flagged access to long-term positive and stable cashflows, while 70% of advisers cited a level of inflation linkage.
Mark Smith, Partner at Andrews Gwynne, commented:
“We have invested in infrastructure for over 10 years, but over the past 3 years we have gradually moved our clients’ portfolios towards more exposure due to its relatively stable return profile. In a world where we are concerned over valuations of traditional asset classes, the income is also attractive for many of our clients.
“Recent performance from funds such as the FP Foresight UK Infrastructure Income Fund (FIIF) has demonstrated the clear advantages of a diversified fund approach for clients. Since entering the fund in June 2018, we have been impressed by the level of protection from market volatility that it offers and believe infrastructure will continue to increase in popularity as investors recognise its resilience and ability to generate stable, uncorrelated levels of income.”
Mark Brennan, Lead Fund Manager of FIIF, said: “Infrastructure and renewables are rapidly evolving into mainstream asset classes for retail investors and this trend is likely to continue over the coming years as advisers become more familiar with its advantages and more high-quality funds enter the market.”
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