Financial advisers back UK infrastructure to counter market headwinds

75 per cent of advisers are positive about the investment outlook for UK infrastructure assets

Three quarters (75 per cent) of financial advisers are bullish about the investment outlook for UK infrastructure assets and the majority (59 per cent) expect to see increasing demand amongst clients for exposure to the sector through SIPPs and ISAs over the next five years, according to a new study.

The research, conducted by Foresight Group LLP, a leading independent infrastructure and private equity manager, among 206 financial advisers, shows that infrastructure is poised to become an increasingly popular asset class for investors as it mitigates four of the biggest headwinds facing client portfolios. These were identified as volatility by more than half (56 per cent) of advisers, a market correction (49 per cent); inflation (42 per cent) and interest rate rises (28 per cent). 

Three in ten (32 per cent) advisers are looking to increase their clients’ allocation to the asset class over the next three years.

Foresight’s analysis reveals that UK Listed Infrastructure investment companies significantly outperformed UK equity markets over five years to August 2017. The FTSE All Share grew 61 per cent compared to 70 per cent for UK Listed Infrastructure investment companies while also experiencing significantly lower volatility (4.9 per cent against 13.1 per cent) over the same period.

In response to growing demand from advisers and investors, Foresight is applying its experience in the energy and infrastructure sectors to launch an income fund targeting UK infrastructure later in 2017. The fund will invest in UK listed renewable energy and infrastructure investment company equities and bonds.

Growth of renewable energy as an investible asset class

The UK has seen unprecedented growth in renewable energy and infrastructure investment over the last five years. In the next eight years, the UK is predicted to experience a 27 per cent annual increase in cumulative renewable energy generation. Much of this investment has and is expected to come from UK listed renewable energy and infrastructure investment companies, of which there are over 20, with a combined market capitalisation of £17bn.

Jamie Richards, Partner at Foresight, commented: “The global and UK energy market is undergoing a generational change, opening investment opportunities across generation, transmission and distribution technologies. The global decarbonisation agenda will lead to a growing reliance on renewable energy, which is becoming cheaper to produce and easier to store. Meanwhile, the retirement of existing fossil fuel plants will drive increased demand.”

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