The past decade has witnessed the birth of a new asset class: Global Listed Infrastructure Securities (GLIS). While investors have embraced infrastructure as an asset class since the 1990s, the idea of investing in infrastructure via listed securities was developed by a small number of Australian asset managers in 2005-2007.
GLIS is now widely acknowledged as a standalone asset class by asset consultants, investors and the funds management industry. Today we estimate funds under management in GLIS to stand at around US$100 billion; not bad from a standing start just a decade ago.
Performance is everything
- reviews the performance the asset class has achieved for investors over the past 10 years;
- analyses the steady increase in investible assets;
- reviews major trends that have affected GLIS thus far and
- looks ahead to the main themes we expect will impact GLIS over the next decade.
GLIS provides investors with a liquid and globally diversified means of gaining exposure to essential service infrastructure assets. These assets are relatively uncorrelated with other asset classes, provide investors with inflation linked income and have the potential for modest capital growth. GLIS has become a successful standalone asset class because its risk-adjusted investment returns have exceeded investors' expectations.
Use of GLIS within investor portfolios has varied over time. Initially we saw GLIS used as a defensive, low volatility equity. This expanded to see it used as a source of income, as declining bond yields increased the relative appeal of its growing and relatively secure dividend streams. Most recently, we have seen listed infrastructure form part of the real assets segment of investors' portfolios, due to the nature of its long-life, hard assets and ability to provide insulation from the effects of inflation. We have also seen investors utilise GLIS as a diversified, liquid and lower fee alternative to unlisted infrastructure allocations.
Over the past decade, the GLIS asset class has generated returns of 9% p.a. with a standard deviation of return of 11% pa. This compares favourably to global equities (6% pa), global property securities (3% pa), Master Limited Partnerships (MLPs, 6% pa) and global bonds (8% pa).