An asset class is a broad group of securities or investments that have similar financial characteristics.

Traditionally, there were four main asset classes:

  • Cash
  • Shares
  • Property and;
  • Fixed-interest securities (corporate and government bonds)

In recent years the asset classes available to private investors has widened, so we find that infrastructure, for example, is now considered an asset class in its own right.

There are two broad types of infrastructure:

  1. Economic infrastructure, in particular:
  • Transport (ports, airports, roads, bridges, tunnels, parking)
  • Utilities (energy distribution networks, storage, power generation, water, sewerage, waste)
    • This includes green/renewable energy, such as solar and wind farms
  • Communication (transmission, cable networks, masts, satellites)
  1. Social infrastructure, such as:
  • Schools and other education facilities;
  • Student Accommodation & Social Housing
  • Healthcare facilities such as hospitals and GP surgeries
  • Central and local Government buildings

Why invest in infrastructure?

The key benefits to private investors of holding infrastructure funds in their portfolios are:

  • Diversification – Infrastructure assets typically have a low correlation with other asset classes. In other words their value generally does not rise and fall in line with other asset values.
  • Risk management – the broader the diversification of your investment portfolio the more effectively investment risk is managed – providing more opportunities for potential returns whilst helping to reduce the overall risk of a portfolio.
  • Defensive position – infrastructure is generally regarded as a defensive asset class, in other words it tends to be less volatile than other asset classes during a downturn. This is because the underlying assets are often providing essential services.
  • A source of stable income – Many tangible, long term infrastructure projects, such as toll roads, rail lines and oil and gas pipelines have high quality, visible and predictable cash flows. The income is usually linked to inflation, so tends to provide stable returns to investors over the longer term.

At Fogwill & Jones we are continually researching markets to source investment opportunities for our clients and infrastructure funds and investment trusts play a key role in the construction of our portfolios.

If you would like to discuss investment strategies or any other financial planning matter, please do not hesitate to contact us on 0114 2588899 or email margaret@fogwilljones.co.uk.  Our Independent Financial Advisers are qualified to provide advice in the areas of retirement planning, tax planning, savings, inheritance tax, investments and protection.

Source – Andrew Ball – Chartered Financial Planner (Fogwill & Jones Asset Management Ltd)

11.06.2020