October 09, 2024

Practical considerations for listed infrastructure

Author
Overview
Topics
Research and Insights

Sergiy Lesyk

Director, Research and Analytics

Infrastructure assets have shown the ability to generate a steady income stream. In addition to higher dividend yields, listed infrastructure investments have historically offered higher risk-adjusted return and a more resilient income profile during downturns. In this paper, we seek to substantiate these infrastructure investment theses in practice.

Key takeaways:

Listed infrastructure may have attractive properties with its own income profile, risk drivers and characteristics. Total capitalisation of core infrastructure equities adjusted for free float is substantial at over US$ 2.5 trillion
In market downturns, infrastructure has exhibited defensive qualities, which attracts attention of investors in times of high volatility
Relatively high dividend yield, inflation protection and stable income will appeal to investors seeking less volatile, long-term returns

Points of differentiation:

Greater diversification and historically higher risk-adjusted returns offer additional reasons for market participants to consider infrastructure for their global investment portfolios
Listed infrastructure also has higher risk-adjusted returns historically compared to the wider equity market

 What does our research mean for investors? 

The FTSE Infrastructure Index Series provides the means to measure and benchmark the returns of globally listed infrastructure companies. FTSE Russell Infrastructure Indexes offer practical and flexible tools for investors seeking tactical or strategic exposure to the investment segment.

Listed Infrastructure is an investment category often seen by investors as a diversification tool that can provide a hedge to long-term liabilities by offering exposure to potentially stable returns, steady income and higher risk/return profile than the wider equity market.
Listed Infrastructure covers a range of sectors, including transportation, energy, utilities, communications and social infrastructure.
FTSE Russell defines core infrastructure companies as those that own, manage or operate structures or networks used for the processing or moving goods, services, information and data, people, energy and necessities from one location to another.
The FTSE Infrastructure Index Series is a comprehensive set of indices that reflects the performance of infrastructure and infrastructure-related listed securities worldwide. The series is based on the FTSE Global All Cap Index Series, which is a part of the FTSE Global Equity Index Series (FTSE GEIS). Both developed and emerging markets are included.

FTSE Core Infrastructure Indices are a subset of the FTSE Infrastructure Index Series. They comprise companies, which derive at least 65% of their revenues from core activities of development, ownership, management and/or maintenance of transportation, energy or telecommunication infrastructure assets.

The indices were introduced on April 4, 2011, with the history calculated from December 29, 2005, using hypothetical data. In March 2015, the FTSE Infrastructure Index Series was complemented by a stock and sector-capped version of the Core Infrastructure Indices, called the FTSE Core Infrastructure 50/50 Indices.