Over six-in-10 (62 percent) U.K. financial advisers are looking to increase their clients’ allocation to infrastructure over the next three years, a rise of 32 percent from last year, according to a survey by investment manager Foresight Group.
“Continuing market volatility and clients’ overexposure to traditional asset classes such as equities and fixed income have given rise to a dramatic shift in sentiment towards infrastructure,” said Mark Brennan, lead fund manager. “With an increasing number of infrastructure funds accessible to retail investors entering the market, the opportunity is there for advisers to diversify client portfolios into an asset class that not only produces stable and predictable returns but mitigates many of the threats looming into view.”
The growing demand for infrastructure is one of the key themes to emerge from Foresight’s survey in which advisers identified de-risking as the biggest change they had made to clients’ portfolios over the last year.
“FIIF’s performance over the past year amply demonstrates how high-quality infrastructure and renewable assets can deliver predictable income with low volatility, uncorrelated to traditional asset classes,” said Brennan.
Well over 90 percent of advisers said they are increasingly concerned about a sustained downturn and increased volatility while three-quarters (75 percent) are worried about the impact of interest rate rises. At an asset class level, clients’ exposure to U.K. equities, fixed income and global equities are causing the biggest headaches, according to advisers.
Three-quarters (76 percent) of advisers said the main qualities sought through exposure to infrastructure are low correlation to equity markets, low volatility (58 percent) and a defensive element (55 percent) to their portfolios. Over a third (37 percent) of IFAs cited Brexit uncertainty as another key driver behind the growing demand for infrastructure.
The study was commissioned to mark the first anniversary of the FP Foresight UK. Infrastructure Income Fund (FIIF or the Fund), which delivered a full year yield of 5.35 percent and dividend payments of 5.35p per unit. Since its launch on 4th December 2017, the fund has achieved significant capital appreciation contributing to a one-year total return of 11.65 percent with annualized volatility of 4.6 percent. In the same time period, the U.K. All Share delivered a total return of -1.27 percent with annualized volatility of 11.1 percent.
