Industrials, Infrastructure Can infrastructure add value to my portfolio?

In the near term, global industrial stocks can benefit and deliver portfolio returns. We see longer-term portfolio opportunities in infrastructure, automation and robotics, and greentech. Infrastructure-linked assets may also help achieve financial goals thanks to long-term cashflows and inflation mitigation.

Infrastructure can benefit from upgrades, net-zero investment, and government support.

• Emerging Asia needs to invest USD 1.7 trillion in infrastructure each year from 2016 to 2030 to remain competitive, according to the Asian Development Bank.
• CIO expects about USD 40–50tr of global energy transition investments in the years 2021–30, in support of net-zero efforts.
• Policies like the US Inflation Reduction Act and EU Green Deal Industrial Plan demonstrate government support for infrastructure.

We see return potential in industrials, greentech, and automation and robotics.

• Global industrials can benefit from a robust next capital spending cycle, inlcuding in defense, mining, and oil and gas.
• Greentech companies are exposed to infrastructure spending on the energy transition, decarbonization, and energy efficiency.
• We estimate the overall automation and robotics market to grow to USD 334bn in 2024, from USD 269bn in 2022.

Long-term exposure to infrastructure can help achieve financial goals.

• High barriers to entry and the monopolistic positioning of many infrastructure assets make them less sensitive to the economic cycle.
• Since 2003, infrastructure has typically performed best when global inflation has been high (based on Cambridge Associates Infrastructure Index data).
• Infrastructure's long-term cashflows may help investors better match assets with liabilities, especially beyond their lifetime.

Did you know ?

The International Energy Agency (IEA) estimates that the global market for key mass-manufactured clean energy technologies will reach a value of about USD 650bn by 2030, more than triple today's level.

Investment View

Infrastructure and related investments can help investors grow their wealth, diversify portfolio returns, and better match long-term liabilities to assets. We see value in infrastructure (including greentech) and selected long-term themes including automation and robotics. On a tactical horizon, we like global industrials as a means to express this theme.

Main contributors - Matthew Carter, Vincent Heaney

Original report - Can infrastructure add value to my portfolio?, 14 July 2023.