The UK infrastructure sector, which covers renewable energy, transport and utility networks, digital and social infrastructure, looks favourable compared to traditional asset classes such as bonds and equities in the year ahead, according to TIME Investments.
The asset-backed and income-producing investment specialist said that evidence in January 2022 shows it is likely to be a challenging year for financial markets as economies rebuild and adapt following the Covid-19 pandemic.
Other factors include rising inflation, tightening of financial conditions, heightened volatility, and economic growth that has most likely peaked and could roll over.
TIME said that factors are likely to have a less severe impact on many infrastructure assets thanks to its “defensive characteristics”.
These include long-term inflation-linked cash flows from high-quality counterparties, such as the government, and the fact that the assets often provide essential assets and services to an economy, allowing it to function successfully.
The sector is also to benefit from the formation of the UK Infrastructure Bank, which is due to unveil a more detailed strategy to support digital connectivity and emerging technologies in the coming year.
The launch of the bank will enable the transition to net zero through renewables and low carbon transport.
According to the firm, the increasing focus on ESG practices and tackling climate changes will also provide opportunities for companies that harness energy from renewable sources.
Chris Cox, fund manager of TIME UK Infrastructure Income, said: “Prevailing economic headwinds are likely to make 2022 a more challenging year for generating inflation beating returns in the financial markets compared to last year.
“The characteristics of UK infrastructure means that it is well-placed to provide investors with an attractive alternative to equities and bonds, offering investors a degree of inflation protection, diversification, relatively low levels of volatility and an attractive income distribution.”
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