Financial advisers expect rise in infrastructure funds

Recent research conducted by Foresight Group LLP has revealed that 75% of financial advisers are expecting to see a rise in the number of clients seeking more infrastructure funds.

Furthermore, 62% of these advisers who took part in the survey predicted that these increased allocations to infrastructure are in conjunction with portfolio de-risking gathering momentum—a trend that will be increasing over the next three years. This is a dramatic increase when compared to 32% from the previous year.

This study is effectively highlighting a rapid transition from “niche” to “increasingly mainstream” asset classes.

Foresight stated: “The growing demand for infrastructure is one of the key themes to emerge from Foresight’s survey in which advisers identified de-risking as the biggest change they had made to clients’ portfolios over the last year.”

Mark Brennan, lead fund manager at Foresight, said: “Continuing market volatility and clients’ overexposure to traditional asset classes, such as equities and fixed income, have given rise to a dramatic shift in sentiment towards infrastructure. With an increasing number of infrastructure funds accessible to retail investors entering the market, the opportunity is there for advisers to diversify client portfolios into an asset class that, not only produces stable and predictable returns, but mitigates many of the threats looming into view.

“FIIF’s performance over the past year amply demonstrates how high-quality infrastructure and renewable assets can deliver predictable income with low volatility, uncorrelated to traditional asset classes.”

According to the independent infrastructure and private equity investment manager firm, over 90% of advisers who took part in their survey revealed that they were increasingly concerned about the sustained downturn and volatility. 75% admitted to being concerned about the impact from the rise in interest rates.

The areas at asset class level that are causing the “biggest headaches”, according to advisers, are client exposure to UK equities, fixed income, and global equities. Moreover, 37% of IFAs cited Brexit uncertainty as a key driver behind the growing demand for infrastructure.

Simon Ring, managing director at Ring Associates, concluded: “We started using Foresight Infrastructure Income Fund earlier this year as part of the lower volatility section within our portfolios. With Bond and Gilt funds being so vulnerable to interest rate rises we are always looking for alternatives. Since using the Fund, we have been impressed by its resilience to the present market negativity and are now considering a greater exposure as a counter to equity volatility.”

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