Over six-in-10 (62%) UK financial advisers are looking to increase their clients’ allocation to infrastructure over the next three years, a rise of 32% from last year, according to a survey.
Investment manager Foresight Group surveyed 198 UK financial advisers about investing into the infrastructure sector, which is defined as “the physical systems of a business or nation including transportation, communication, sewage, water and electric systems”.
The report found that 75% expect to see more infrastructure funds recommended to clients.
A similar number (76%) of advisers said the main reason for exposure to infrastructure is low correlation to equity markets. Low volatility (58%) and defensive element (55%) made up the top three reasons to add infrastructure to portfolios.
Some 37% of IFAs cited Brexit uncertainty as another key driver behind the growing demand for infrastructure.
Continuing market volatility
Over 90% of advisers said they are increasingly concerned about a sustained downturn and increased volatility.
Three-quarters (75%) are worried about the impact of interest rate rises.
Advisers said, at an asset class level, clients’ exposure to UK equities, fixed income and global equities are causing the “biggest headaches”.
Mark Brennan, 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.”
