August 13, 2020 | By: AGF

Strategy Spotlight: Building a Place for Listed Infrastructure in Portfolios

5 min read

A Global Need for Investment

Recent years have seen growing calls around the world for increased investment in infrastructure, as stories of power outages, contaminated water supplies and bridge collapses have been constantly in the headlines. The COVID-19 epidemic has added to this growing sense of urgency, as governments around the world reassess their investment requirements in social infrastructure such as hospitals and enact stimulus measures to kick-start economies brought to a halt by the outbreak.

According to a 2017 study by the consulting firm McKinsey & Co., US$3.7 trillion needs to be invested globally in infrastructure every year to 2030, just to support current economic growth rates. This is a truly global opportunity, with approximately 80% of the investment need outside North America.

Infrastructure Spending by Region - %, $69.4 trillion US, constant dollars
QIF Strategy Spotlight

Source: McKinsey Global Institute. Bridging infrastructure gaps: Has the world made progress? October 2017. For illustrative purposes only. 

Historically, much of the pent-up infrastructure investment remained in government hands or stayed in the private markets. However, there is a substantial opportunity to participate via listed equities too, and as governments look to manage their debt loads and more money is put to work along the infrastructure supply chain, it is likely that the opportunity will continue to grow on the public markets.

Why Invest in Listed Infrastructure?

As more of this pent-up investment flows through to public markets, various companies and industries could benefit, including power producers, electrical equipment manufacturers, toll roads and airports, as well as engineering and construction firms and steel, cement and stone makers.

Infrastructure stocks in several sectors, including transportation, energy and utilities, have also shown a tendency to outperform their broader universe counterparts, both over the long term and during the recent market selloff. In addition to the growth opportunity, listed infrastructure offers benefit to portfolios as a risk-mitigator, with relatively low correlations to other asset classes.

Listed infrastructure can also offer attractive yields for income-seeking investors. At the end of March 2020, the Dow Jones Brookfield Global Infrastructure Total Return Index was yielding 4.73% versus comparable aggregates for global bonds and equities that were yielding 1.22% and 3.1%, respectively.

Whether the goal is to add growth, income or downside protection, it is increasingly evident that portfolios stand to benefit from liquid exposure to the structures, facilities and systems that help support and keep the global economy on track. And while listed infrastructure offers many of the same benefits associated with private infrastructure funds, it comes with greater versatility to gain broad global exposure across multiple sectors and to move in and out of positions more easily. As such, they can routinely be used as both a substitute for and a complement to less liquid approaches

AGFiQ Multi-Factor Global Infrastructure Strategy

AGFiQ’s Multi-Factor Global Infrastructure Strategy employs a proprietary, multi-factor, quantitative investment process, aiming to improve investment outcomes by assessing and targeting the factors that drive market returns. The AGFiQ team believes that combining multiple factors in a complementary fashion can provide a more consistent, long-term outcome through changing market environments.

By employing a systematic, factor-driven approach, the strategy enables investors to access the benefits of listed infrastructure at a far lower cost than traditional and less-liquid approaches.

AGFiQ Multi-Factor Global Infrastructure Strategy

Commissions, management fees and expenses all may be associated with investing in AGFiQ ETFs. Please read the relevant prospectus or relevant ETF Facts before investing. Exchange-traded Funds are not guaranteed, their values change frequently and past performance may not be repeated. Tax, investment and all other decisions should be made, as appropriate, only with guidance from a qualified professional. There is no guarantee that AGFiQ ETFs will achieve their stated objectives and there is risk involved in investing in the ETFs. The risks associated with each AGFiQ ETF are detailed in the prospectus. Before investing you should carefully consider each ETF’s investment objectives, risks, charges and expenses. This and other information is in the ETF’s prospectus. Please read the prospectus carefully before you invest. A copy is available on AGFiQ.com

The commentaries contained herein are provided as a general source of information based on information available as of July 15, 2020 and should not be considered as investment advice or an offer or solicitations to buy and/or sell securities. Every effort has been made to ensure accuracy in these commentaries at the time of publication however, accuracy cannot be guaranteed. Investors are expected to obtain professional investment advice.

AGF Investments is a group of wholly owned subsidiaries of AGF Management Limited, a Canadian reporting issuer. The subsidiaries included in AGF Investments are AGF Investments Inc. (AGFI), Highstreet Asset Management Inc. (Highstreet), AGF Investments LLC (formerly FFCM, LLC), AGF Investments America Inc. (AGFA), AGF Asset Management (Asia) Limited (AGF AM Asia) and AGF International Advisors Company Limited (AGFIA). AGFA is a registered advisor in the U.S. AGFI and Highstreet are registered as portfolio managers across Canadian securities commissions. AGFIA is regulated by the Central Bank of Ireland and registered with the Australian Securities & Investments Commission. AGF AM Asia is registered as a portfolio manager in Singapore. The subsidiaries that form AGF Investments manage a variety of mandates comprised of equity, fixed income and balanced assets.

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