As the backbone of the global economy, infrastructure supports our daily lives and ultimately our prosperity. Yet not enough is being invested in our critical infrastructure, threatening productivity, incomes and even lives. The shortfall in investment globally is estimated to exceed US$1 trillion a year.
Investors have a vital role to play in addressing this “infrastructure gap”, which presents a structural opportunity for long-term investments. Where companies own or control physical assets that underpin the modern economy, we believe their investors can benefit from this global trend.
Ferrovial is one of the world’s leading operators of transport infrastructure. The Spanish company’s portfolio of airports, including London’s Heathrow Airport, and toll roads across Europe and North America, connect business and communities around the world. These assets boast high barriers to entry – in the sense that they are difficult to replicate – and long lifespans. Toronto’s ETR 407 highway has a 100-year concession, for instance.
For investors, high quality infrastructure assets like this have the potential to offer relatively reliable income streams. Importantly, income can also be expected to keep pace with rising prices over time, either because contracts guarantee inflation-protection or because pricing is unregulated.
Ferrovial also proves there is scope for infrastructure firms to add value through innovation. Introducing automated billing systems that remove the need to stop at toll booths, and traffic lanes that use dynamic pricing to allocate demand, are not only good news for highway commuters. Better traffic management is good news for investors too.
Crucially, companies that own critical economic infrastructure also stand to benefit from rising demand. Historically there has been a strong positive correlation between economic growth and travel, for example, so we anticipate demand for toll roads and airports increasing with incomes over the coming decades.
We believe this structural growth, combined with the tight supply of economic infrastructure, means there are opportunities for long-term investors.
The value of the fund's assets will go down as well as up. This will cause the value of your investment to fall as well as rise and you may get back less than you originally invested.