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Infrastructure investment demand surges as investors eye defensive assets, sustainable income post Covid-19

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Infrastructure investment demand has skyrocketed in response to the Covid-19 crisis as investors look to defend their returns amid a volatile market, new research suggests.

More than half of financial intermediaries believe infrastructure is seeing the biggest surge in investor demand among all asset classes in response to the COVID-19 crisis, well above alternatives (38%) and more than twice the amount who chose equities (20%) and fixed income (19%), data from Foresight Group’s Stability in Adversity white paper shows.

The research, which was conducted among 112 intermediaries by Foresight, said that almost three-quarters of intermediaries anticipate their clients’ exposure to infrastructure will increase over the next three years.

It said the three biggest drivers behind infrastructure’s growing popularity among financial intermediaries were its low correlation to traditional assets (73%), defensive qualities (66%) and low volatility (58%).

Much of that demand is down to a demand for sustainable income, the study suggested, with total dividend payouts set to be the lowest since 2015.

Foresight said that 75% of intermediaries say they are likely to consider using infrastructure within their traditional equity income allocation to access sustainable income during the current economic uncertainty caused by COVID-19, including 24% who say they are ‘extremely likely’.

Nearly half of respondents (47%) say infrastructure is the asset class best-placed to produce a regular income during the current economic crisis caused by COVID-19, massively ahead of alternatives (10%) and well above both equities (21%) and fixed income (13%).

Nick Scullion, head of Foresight Capital Management, said, “Advisers recognise that their clients’ portfolios will need to adapt to the new reality if their goals are to be met.

“They also appreciate the benefits that infrastructure can bring to portfolios in terms of providing stability in the face of market adversity.

“In a fast-changing and challenging environment, investors are increasingly looking towards ‘real’ physical assets to generate reliable, regular income and preserve capital values against inflation risks.

“Infrastructure is an asset class whose time has come, offering enduring solutions to today’s global challenges.”

AltAssets readers can access the full white paper for free by clicking here.

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