Alex Leung Manisha Bicchieri Alejandro Tapia James Pilkington Joe Sciortino


Alex Leung, Infrastructure Analyst

The infrastructure sector is resilient by nature. Given it provides services deemed essential in today’s society (such as electricity, heating, high speed internet, mobility), demand is generally steady and reliable, as we saw during the Global Financial Crisis or the recent COVID-19 pandemic. Historically, governments have implemented infrastructure-friendly policies during periods of economic weakness, which has also made the asset class less tied to the economic cycle.

A Preqin survey from November 2021 showed that 47% of global institutional investors planned to increase their long-term allocation to infrastructure, as opposed to 7% intending to reduce their exposure. We believe here are many reasons why investors are interested in increasing their allocation. For example, infrastructure’s resiliency and low correlation to other asset classes has helped investors further diversify their portfolios, which is a particularly important attribute in the current market volatility.

In addition, infrastructure investments offer a relatively strong cash yield, which makes it well suited for certain investors such as pension funds that are looking for cash flows that can match their liabilities. Also, the asset class offers attractive risk-adjusted returns; for example, both infrastructure equity and debt have historically experienced relatively low volatility, while infrastructure debt historically had lower levels of default risk and higher premiums compared to corporate debt.

One important characteristic of private infrastructure is its performance during periods of high inflation (Chart 1). Based on historical data, perhaps it is not surprising that private infrastructure equity and public equities both perform well when GDP growth is strong. However, where infrastructure has really shone is when there is above average inflation, a time in which infrastructure equity has outperformed public markets. This outperformance is even more apparent when high inflation is combined with low GDP growth.

Chart 1: Developed markets investment performance in different GDP/CPI environments (1Q05 – 3Q21)

Sources: Cambridge Associates, Bloomberg, MSCI, OECD, from Q1 2005 to Q3 2021. Note: Data based on quarterly Y/Y data, unlisted infrastructure based on Cambridge Associates data; GDP and CPI data based on OECD countries; threshold for high vs. low GDP and CPI are both ~2% (based on quarterly data of observation period). Past performance is not a reliable indicator of future results.

This chart compares the performance infrastructure assets against the MSCI World in high and low inflation environments as well as high and low GDP growth environments.

Finally, looking at the current geopolitical scenario, the war in Ukraine has forced the world to refocus its attention on traditional energy sources such as natural gas and nuclear power in the near term. However, high energy prices have historically been a driver of innovation in clean technologies. The current crisis could therefore accelerate the global energy transition in the long term – a secular trend that the private infrastructure sector is highly exposed to.

Food and Agriculture

Manisha Bicchieri, Sustainability and Research Analyst and Alejandro Tapia, Research Analyst

Investing in food and agriculture through farmland provides a balance of current income and long-term capital appreciation while also providing diversification as it typically has a low correlation to other asset classes. As a natural inflation hedge, many investors are considering farmland now in times of high inflation and rising interest rates. How does inflation impact this sector and how does the future of this asset class look given the current global situation?

In 2021, the Consumer Price Index (CPI) for all food, a component of the all-items CPI, increased an average of 3.9%. Comparably, the United States Department of Agriculture (USDA) predicts food prices to increase between 5.0%-6.5% in 2022.

However, retail food prices only partially reflect crop prices, with the latter being more volatile.

In general, higher crop prices bolster farm incomes which result in greater farm revenues and, ultimately, increased land values. As such, farmland assets provide an inflation hedge for those investors looking to protect their investment returns, offering capital preservation in addition to current income.

An appetite for healthy returns

Historically, there has been a strong correlation between rising inflation and farmland performance.

An analysis conducted by the US Department of Agriculture shows that during the period 2017-2021, food inflation has been hotter than all segments outside of housing and transportation, due to the pandemic situation and imbalances in the supply chain.

When annualized from 1991 to 2021, the NCREIF Core Farmland Index (CFI) has generally shown positive returns, 9.8% nominal or 7.4% real. With the exception of some periods (such as the post Global Financial Crisis period from 2008), the association between farmland returns and inflation has been positive, and is further represented by a correlation coefficient of 0.24 between CFI returns and CPI inflation rates during the same period (1991-2021) (Chart 2).

Chart 2: US farmland in a real estate portfolio, annual returns 1991-2020


Nominal1 (%)

Real2 (%)

Nominal2 (%)

Sharpe Ratio






Farmland (CFI)3
























































Farmland (CFI)











2-Standard deviation

UBS Asset Management, Real Estate & Private Markets, Research & Strategy research based on data obtained from the Bureau of Labour Statistics, Morningstar, the Bar-Cap Aggregate Bond Index, EAFE International Stock Index, S&P 500 Stock index, IA SBBI US Small Stock Index, NAREIT, NCREIF Property Index and Core Farmland Index as of December 31, 2021. Source of CPI: Bureau of Labour Statistics. CPI is the Consumer Price Index, an inflationary indicator of the standard of living in the US. It is also referred to as the "cost of living" index. Means are annualized returns consistent with methodology used by NCREIF and are as of December 2021. Standard Deviation and Correlations are based on quarterly returns. Past performances is not an indication of future results, and the possibility of loss does exist. The Core Farmland Index does not include fund-level management or other fees or fund-level expenses, is not available for investment and is for illustrative purposes only.

On the other hand, the relationship between interest rates and farmland returns hasn’t seemed to be following a linear path, with farmland returns showing a stable performance in a volatile setting.

When comparing the current inflation scenario with the last major one registered in the US between 1979 to 1981, we can spot different drivers. Back then, there were many factors contributing to inflation (various energy sectors, commodities, food items), whereas today the main drivers are the spike of gas prices, utilities (such as chemicals and vehicles), rising energy costs, and unbalance in the supply chain.

All this is exacerbated by Russia’s invasion of Ukraine, which is provoking a surge in food prices (especially grains and oilseeds) and utilities (where Russia is a major fertilizers exporter).

Still, we believe that farmland keeps being an asset class worth investing in, especially for investors looking for natural climate solutions.

Private Equity

James Pilkington, Multi-Managers Private Equity Portfolio Manager

Private equity momentum has been good following 2021. According to McKinsey Global Private Markets Review 2022, private equity outperformed all other private markets asset classes. We believe the current scenario looks reassuring despite the current high interest rates and price-volatility.

We believe inflation to be a manageable challenge for private equity-backed companies. This is because the private equity structure allows companies to be managed with a longer-term view, in contrast to public companies which face external pressure to report stable quarterly earnings. This gives management at private equity-backed companies greater flexibility to problem-solve, which can be a significant advantage in an uncertain environment. For example, the strategies and companies of our private equity portfolio are carefully selected. Often, they are market-leading companies with differentiated products that enjoy greater than average pricing power and the ability to pass costs through to their customers.

Inflation can have outsized effects on a particular sector or region so private equity portfolios which are well-diversified by geography, investment stage, company size and industry provide the best protection.

So far, we have not changed our investment thesis, which is cycle tested, and we predict good prospects for investing in privately held companies over the long term.

Private credit

Joe Sciortino, Head Multi-Managers Private Credit

Private credit, also known as private debt, can help investors secure high yields and diversify their portfolios. Particularly in these times of high interest rates and inflation, many are starting to look away from the high volatility of the stock and bond markets.

Inflation can be a double-edge sword to private credit, creating both headwinds and tailwinds across the corporate, real estate and consumer segments.

A large portion of private credit strategies are floating rate, and therefore they generally provide some protection to investors against inflation. As a result, many strategies will benefit from rising interest income and the underlying deals should ultimately generate higher yields. This exposure should serve as a complement to a traditional fixed rate bond allocation.

However, rising inflation and interest rates will ultimately increase credit risk as borrowers contend with higher input costs and rising debt service requirements, creating substantial tailwinds. While consumer and corporate balance sheets are in good shape, there will likely be greater dispersion in fundamentals and the credit selection will be more important.

Amid this backdrop, our private credit strategy focuses on floating rate, short duration strategies whose yields should increase as interest rates rise. Furthermore, we are targeting asset classes where credit fundamentals are strong, and we ultimately expect there to be minimal deterioration in credit performance by focusing on sectors and borrower groups that have the ability to withstand and/or pass through inflation.


Mid-year outlook 2022

With inflation reaching multi-decade highs in many parts of the world, how can investors position their portfolios for this changing investment landscape?

About the authors
  • Alex Leung

    Infrastructure Analyst, Research & Strategy

    Alex Leung, infrastructure Analyst in UBS AM's Real Estate & Private Markets' Research & Strategy team. Alex joined UBS AM in April 2018. Conducts macro and fundamental research on infrastructure investment markets, identifying opportunities. He works closely with the investment team to develop long-term strategies. Previously VP at Sanford C. Bernstein, analyzing investments in global energy, utilities, and industrial sectors. Held positions in research and trading departments in Hong Kong and New York. Holds Series 7 and Series 63 licenses.

  • Manisha Bicchieri

    Sustainability and research analyst

    Manisha Bicchieri is a sustainability and research analyst for farmland at UBS-AM Real Estate US division. With over 6 years of agricultural finance and investment experience. She manages ESG initiatives and implements leading harvest farmland management standards. Manisha has worked with Farm Credit East, Manulife investment management, and the Rohatyn group. She holds a BSc in resource Economics, focusing on environmental economics and policy, from the University of Connecticut, along with a minor in agribusiness management and food science.

  • Alejandro Tapia

    Research Analyst

    Alejandro Tapia, Associate Director, is a Research Analyst in Food & Agriculture and ESG Private Investments, which form part of Real Estate & Private Markets within UBS Asset Management. He is responsible for leading the development of new investments within the global food vertical and sustainable/impact investing. Alejandro also provides analyst support for Farmland acquisitions.

  • James Pilkington

    Multi-Managers Private Equity Portfolio Manager

    James Pilkington, Director, is an Investment Analyst of Multi-Managers Private Equity, a business which forms part of Real Estate and Private Markets within UBS Asset Management. As an analyst within the private equity practice, James is responsible for the origination, due-diligence, and monitoring of existing and prospective investments within venture capital, growth equity, special situations, and buyout strategies, primarily in North America.

  • Joe Sciortino

    Head Multi-Managers Private Credit

    Joe Sciortino, Managing Director, is Head of Multi-Manager Credit and is a member of the UBS Hedge Funds Solutions Senior Investment Forum. He is primarily responsible for leading the team that conducts market research and manager due diligence across Corporate Credit, Structured Products, Specialty Lending, Real Estate Debt, and Insurance strategies. The group invests across the liquidity spectrum in hedge funds and private credit funds. Joe is the primary portfolio manager for all credit products and customized mandates within the multi-manager business and heads the private credit investment committee. He is a member of the investment committee, review committee and management committees of HFS.

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