Investor appetite for alternatives such as infrastructure will only be increased as a result of covid-19, according to a report released by Foresight Group.
The Foresight survey of 112 UK-based financial advisors in May found 55 percent of respondents believed infrastructure is seeing the biggest surge in demand in the aftermath of the crisis, more than other asset classes including equities, property and fixed income strategies, with the survey assessing advisors to both institutional and retail investors.
While 72 percent of those surveyed expected clients’ exposure to infrastructure to increase over the next three years, the Foresight report also expressed a note of caution, after 65 percent of respondents cited infrastructure’s low correlation to equities and low volatility as a defensive investment move.
“Investors do still need to partner with those managers investing in the right infrastructure assets, however,” Foresight said in its report. “The covid-19 outbreak has challenged the notion that all ‘core’ infrastructure is resilient in the face of an economic downturn. Airports, ports and toll roads have clearly been hit hard by the lockdown whereas renewable energy ‘utility’ infrastructure that continues to help meet the constant and robust demand for power has proved remarkably resilient.”
The survey also highlighted Brexit as a potential opportunity for infrastructure investors, with the UK’s transition period to expire at the end of the year. While 53 percent of those surveyed by Foresight in December 2019 said Brexit would increase the demand for infrastructure among UK-based investors, this has now risen to 56 percent. Some 54 percent also believe infrastructure is the most likely asset class to receive an increase in demand from UK investors as a result of covid-19.
Foresight Group manages both listed and unlisted infrastructure and renewable energy funds and in January reached a €342 million first close on its Foresight Energy Infrastructure Partners fund, ahead of a €500 million target.