Infrastructure, sector with high growth opportunities


The OECD estimates global infrastructure investment requirements of $50 trillion by 2030. SSGA launched SPDR Morningstar Multi Asset Global Infrastructure UCITS ETF. Lesné (SSGA): “It’s the world’s first ETF that combines both equity and fixed-income exposures to infrastructure”

With its potential of long-term and steady returns, the infrastructure market is set to grow. However, many investors don’t have the scale to invest in unlisted infrastructure or directly into debt securities, making it difficult for smaller investors to gain exposure. “An ETF investment combats this by offering a regulated, open-ended vehicle through which to access the asset class”, Antoine Lesné, Head of ETF Sales Strategy EMEA, State Street Global Advisors (SSGA), said.

The OECD estimates global infrastructure investment requirements of $50 trillion by 2030, and McKinsey expects a figure closer to $57 trillion. Meanwhile, the International Energy Agency estimates that adapting to climate change alone will require around $45 trillion over the next 40 years.

“There are various investment vehicles that can be used to access infrastructure – Lesné explained – First, direct investment into specific projects, but this is only possible for the largest of investors, for example sovereign wealth funds or very large pension funds. Second, private equity funds that invest in projects but they are not very liquid and the rate of return is of a long run. Third, the classic mutual funds, that have successfully raised significant assets, but there is no transparency in the underlying securities – Lesné added – Then there is another possibility, offered by Etfs, but the existing products on the market (in Europe fewer than ten) are equity-only ETFs. So we decided to launch in April the SPDR Morningstar Multi Asset Global Infrastructure UCITS ETF, the world’s first infrastructure exchange-traded fund (ETF) that combines both equity and fixed-income exposures to infrastructure”. It’s an alternative product, a unique index with global coverage, 50% equities and 50% bonds.
The launch follows the release of research by SSGA which shows that 35% of intermediaries and 29% of institutional investors (in UK, Germany, Switzerland, France Italy and The Netherlands) planned to increase their investment in infrastructure in the second quarter of 2015.
“When you invest in infrastructure, you seek return stability, predictable revenues, higher yields and lower volatility – Lesné said – This Etf tracks an index including 550 equities and 1050 bonds. Currently we didn’t buy the whole index, but now we cover 750 titles between stocks and bonds”.

State Street Global Advisors has recently sponsored the Etf Risk Infrastructure survey.
ETF Risk ran a country-specific industry survey focused on current infrastructure investments market, in order to identify the key trends and motivations behind infrastructure investing – both listed and unlisted – and evaluate obstacles in the investment process.
The survey targeted intermediaries and institutional investors, including key industry players from Switzerland, the UK, The Netherlands, Italy, Germany and France. Switzerland is currently among countries with the lowest exposure to infrastructure. Just a 3.3% of intermediaries and a 6.7% of institutional investors of the overall sample are currently investing in this asset class, against the 13.3% of intermediaries and 10.0% of institutional investors in the UK. A 11.7% and 6.7% of the same sample (represented by Swiss intermediaries and institutional investors respectively) are not currently investing, but they intend to in the future. In details, Swiss intermediaries are the most willing to invest, if compared with other surveyed countries (UK 1.7%, France 6.7%, Germany 10%, Italy 10% and The Netherlands 6.7%).
Having regard to the proportion of the portfolio invested in infrastructure, a 10% of both Swiss intermediaries and institutional investors said they have no exposure to this asset class, nearly as much as in the Netherlands (10% of intermediaries and 15% of institutional investors). Other countries show a larger exposure, with just 8.3% of Italian intermediaries saying they are not investing any portion of their portfolio in infrastructure, compared with 6,7% in Germany and 3.3% in UK and France respectively.
A 3.3% of intermediaries and a 8.3% of institutional investors from Switzerland are also planning to increase their investment in infrastructure by the end of 2015.
Finally, the survey reveals that Swiss investors (both intermediaries and institutional) are likely to reallocate money mostly from emerging market equities and fixed income in order to increase their allocation to infrastructure.