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- September 2011: Vol. 4, Number 8

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Infrastructure’s Inflation Fighters: A Look at If and How Ports, Roads and Other Infrastructure Assets Can Protect Against Inflation

by Loretta Clodfelter

Investors choose infrastructure investments for a number of reasons: diversification, high yields and low correlations are a few of these. In addition, infrastructure can provide some protection against high inflation, and that’s very attractive to institutional investors; however, inflation-hedging promises have not always lived up to the hype, and investors seeking this benefit need to set expectations and choose the right assets.

The relationship between infrastructure and inflation is not always a simple one-to-one. Inflation is not one monolithic experience but instead varies across geographies and sectors as well as from one investor to another. And with Western economies in the doldrums, deflation — as much as overheated price growth — has investors on edge right now. Despite this, inflation always poses a serious risk to investors, and infrastructure investments can offer some protection.

“Many portfolios today are insuffi

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