IFAs predict average allocations to infrastructure will reach 7 percent in the next five years, according to new research conducted by Foresight Group, an independent infrastructure and private equity manager.
While appetite for infrastructure is increasing, the study reveals growing concern among advisers of the risk of investing in so-called fake infrastructure. Two-thirds (69 percent) of intermediaries believe greater awareness of fake infrastructure and the collapse of Carillion will lead a flight to quality as advisers and investors take a closer look at what they are buying.
Protection against inflation and long-term positive stable cashflows were ranked as the most important factors for advisers considering infrastructure investment, followed by attractive yield and low correlation to traditional assets such as equities and bonds.
The results underlined the popularity of infrastructure as a tax year-end investment to utilize unused personal allowances. Over three-quarters (78 percent) of IFAs said they are recommending infrastructure investment through pension products (including SIPPS) and 70 percent through ISAs.
In 2017, Foresight launched its Open-Ended Investment Company (OEIC) fund of funds, FP Foresight U.K. Infrastructure Income Fund. The fund, which is actively managed, invests in U.K. listed renewable energy and infrastructure fund/investment company equities and bonds. It targets an annual income yield of 5 percent per annum with dividends paid quarterly and delivered tax free when held in a SIPP or ISA.
Jamie Richards, partner at Foresight Group said, “Advisers are becoming increasingly familiar with the benefits that access to listed infrastructure can bring to client portfolios and predict that the asset class will continue to grow over the coming years. What’s emerged from the collapse of Carillion is a much clearer understanding of listed infrastructure and listed ‘quasi’ infrastructure, comprising products that have been incorrectly badged. We expect this will encourage a flight to quality as advisers recommend opportunities that provide access to the consistent, inflation-linked underlying cash flows that make the asset class so attractive, particularly in times of uncertainty when markets are rocked by volatility. As year-end approaches, we’re seeing strong interest from advisers recommending infrastructure for their clients’ ISAs and SIPPs.”
Available on a variety of platforms and wraps, the fund has a minimum investment of £1,000 ($1,408), or £100 ($140) per month for regular savings, and comprises one share class for both retail and institutional investors with the option for either income or accumulation.
