Investing in infrastructure can be advantageous for SMSF members regardless of whether they are in accumulation phase or pension phase, according to a portfolio manager specialising in this asset class.
“SMSF members in retirement and SMSF members who are still working might look at an investment in infrastructure for different reasons,” Maple-Brown Abbott head of global listed infrastructure Andrew Maple-Brown told selfmanagedsuper.
“For the group in retirement, the relative dependability of the income can be attractive versus the other asset classes, and I think for the younger generation the ability to have some growth potential, but at a lower risk than broader equities, will also be of interest.”
While the alignment of the investment time horizons made infrastructure an appealing asset class for younger members of SMSFs, Maple-Brown said there was a very compelling argument for retirees to allocate a portion of their portfolios to those types of assets.
“For people entering retirement and in retirement, income is still going to be incredibly important for them. From the analysis I’ve done previously, certainly the predictability of the income from the asset class is as good as any other asset class I have seen,” he said.
“Over the last five years, cash rates have dropped substantially and anyone who is holding cash for income has had a significant hit.
“Similarly bond yields have come down substantially and anyone relying on bonds for income have also taken a severe hit.
“Within the equities asset classes, infrastructure dividend yields have been a lot more predictable. During the GFC (global financial crisis) we saw a small dip in distributions, but that quickly recovered, continued to grow and has generally kept track with at least inflation, and that predictability has certainly been stronger in the infrastructure asset class than it has been in broader equities.”
He warned SMSF investors had to be aware of the illiquid nature of infrastructure assets and the large amounts needed for direct investments in the asset class. With that in mind, he suggested investing in infrastructure through listed vehicles might be more appropriate.
While the objective of every investor was different, he suggested an allocation to infrastructure could be made in conjunction with a lower investment in alternatives, could replace an allocation to global property to create a combined allocation to property and infrastructure, or as a portion of a global equities allocation.
The recommended time frame for an investment in listed infrastructure was four to five years, he said.
