Infrastructure public equity has distinct characteristics that can reinforce institutional portfolios. This asset class offers the potential for higher yield and total return, combined with lower volatility, compared with traditional global equity.
Infrastructure stocks stand out for their potential for reliable, inflation-linked cash flows often guaranteed by long-term contracts for essential services. As a result, their returns tend to be less sensitive to economic cycles. They can play a defensive role in portfolios with potential to improve risk-adjusted returns.
Institutional investors can gain important diversification benefits by substituting listed infrastructure for part of their global equity exposure. For example, the potential to increase returns and reduce portfolio volatility can improve asset-liability matching for insurance and pension funds. Still, many institutional investors are underexposed to infrastructure, considering the overlap between global equity and listed infrastructure indexes is only 2.8%.
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