Listed Infrastructure progresses in an uncertain environment and slowing global economy


Listed infrastructure equities moved higher in October in what RARE Infrastructure and others continue to describe as a late-cycle environment.

“Both our global listed infrastructure Value and Income Funds showed enhanced performance during October against a backdrop of positive equity markets,” said RARE Senior Portfolio Manager Shane Hurst.

“Although the yield curve in the US has moved away from an inversion path in recent weeks, we continue to believe that defensive strategies are a prudent course for investors and that listed infrastructure presents opportunities for investors looking to preserve and grow capital at the same time as looking for downside protection.

“Uncertainty has become more pronounced in recent times as the global economy has slowed.

“Global manufacturing weakness, low inflation, low economic growth and geopolitical tension has the world on edge.

“However, while there is plenty to worry about, global equities are still an engaging proposition as it is unlikely that the US economy, with record low unemployment, will dip into recession any time soon.

“Central banks are once again providing monetary stimulus, and fiscal stimulus is starting to come through.

“Retreating to cash or bonds runs the risk of missing out on potentially meaningful returns over the next year.

“In this environment, we believe investing in global listed infrastructure allows investors to navigate market volatility while remaining invested in equities. Infrastructure companies, when selected appropriately, can provide excellent visibility over revenues and dividends driven by stable earnings of the underlying assets, regulation and long-term contracts.

“A maturing business cycle means that quality assets that deliver growing earnings will be sought after and attract more capital as investors become more defensively positioned. As demonstrated by the chart below, listed infrastructure provides downside mitigation while participating on the upside. Investors can also see that a shallower drawdown leads to an earlier recovery.

“This downside mitigation can, over the long term, translate into a strategy that provides superior risk,” Mr Hurst said.

UK water sparkles in October for RARE

For both the RARE Infrastructure Income portfolio and the RARE Infrastructure Value portfolio Western Europe was a top performer in terms of regions in October. United Utilities, the largest listed water company in the UK, was a lead performer in both portfolios. United Utilities manages the regulated water and wastewater network in northwest England operating under a license with indefinite length.

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