June 24, 2025 • 5 mins
Why are infrastructure assets seen as “safe” investments?
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Episode Transcript
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Speaker 1 (00:03):
Welcome to Ask Fear and Greed, where we answer questions
about business, investing, economics, politics and more. I'm Michael Thompson
and hello, Sean Alma.
Speaker 2 (00:12):
Hello Michael Shaw.
Speaker 1 (00:13):
On something a little bit scintillating, a little bit sexy today. Infrastructure?
Speaker 2 (00:20):
Sure, oh, is there not a more scintillating word in
the English language? And infrastructure?
Speaker 1 (00:27):
If there is, I'm yet to find it, Sean. And
the question today is why are infrastructure assets seen as
safe in inverted commas investments.
Speaker 2 (00:39):
Because they're not sexy?
Speaker 1 (00:42):
Michael, I suppose that's actually a really good way to
put it. It is not a huge amount sexy about
a toll road or an airport or a nice name.
Speaker 2 (00:52):
So for most people investing, we'll talk about managed funds
which invest in infrastructure, all listed infrastructure, things like Trends,
Urban at Las, Arteria. They're big toll road companies here
in Australia. Mostly it's because they are actually boring. That's
why they have these people like them, because they have
(01:12):
what they call defensive characteristics. No matter what's going on
in the world, they just plod along, continue growing, continue
doing their thing. Really predictable cash flows. So toll roads,
for example, people that cross you know, a bridge or
major freeway, they tend to do it the same number
(01:34):
of times every week, people driving to work on it,
so really stable cash flows. Often these cash flows are
inflation linked, so when we had a breakout of inflation,
people end up paying high tolls. For example. These are
very government backed, so sometimes in the energy area and
utilities area, government determines how much prices can increase, but
(01:59):
they do increase them. Often they're linked to inflation, so
they've got a good cash flow. Inflation linked revenue streams.
They don't correlate that well to broader equities, So when
you buy stocks, you actually want some that go up
when others go down and some that go down when
others go up. Well, you probably never want them to
going down, to be perfectly honest, but you don't want
(02:21):
them all always going in the same direction because if
you have that the one you know, if they're going down,
they're all going down. You're not doing so well. So
kind of even within an equity portfolio, you want defensive stocks,
and that's where listed infrastructure do a really really good
job and just kind of whole sort of structure of
(02:42):
public money to infrastructure governments spend money on roads and
schools and bridges and hospitals, so we know that this
that provides an enormous support for infrastructure. So they're just safe,
a lot.
Speaker 1 (02:57):
Of stability, and so this is why then we see
so much money coming from the big super funds, the
big international pension funds that are all looking for these
infrastructure assets because it gives them stability over a longer
period of time.
Speaker 2 (03:09):
Yeah, exactly right. I mean the great example at Sydney
Airport used to be listed on the AASEX. It was
purchased by a bunch of super funds because it's just stable.
So if you mean, they know what they're going to
get out of Sydney Airport and so they took it
off the course and that's what they're getting. And so
the members of those super funds are benefiting from it.
(03:29):
They're just stable. Is boring, Michael boring?
Speaker 1 (03:33):
Is there only a relatively limited number of assets available
in infrastructure and not so much limited, but I mean
they're not exactly something that you can just whip up overnight.
You can't just quickly whip up a new airport or
a new kind of toll road or something. These are
It feels like there's also not a great amount of
change happening within that space.
Speaker 2 (03:54):
Yes, to some extent, you could argue that things like
poles and wires infrastructure. We need a lot of those
to carry renewable energy from wind farms and solar farms.
So that's a really hot area of infrastructure at the moment,
and that's not unlimited, but there's a huge demand for
(04:14):
it still, so certain areas, I mean around AI. Now
it depends how you think about data centers, but some
could argue they become essential infrastructure and there'll be plenty
of demand for that. I agree, like roads and bridges,
and they all have to be upgraded and new roads
come as you develop new areas, but that's probably a
(04:36):
bit more boring. You don't get many new airports, I mean,
there is one being developed in Western Sydney at the moment.
So many classes within infrastructure, there is a limited opportunity.
But then there are some of those growth areas that
we're talking about, poles and wires, data centers, that type
of thing.
Speaker 1 (04:56):
There really is something quite there, actually is something quite appealing,
something sexy, something sexy about certain types of infrastructure, like
an airport that is. Yeah, that's pretty cool. A desalination
plant sean oh yes.
Speaker 2 (05:10):
Detail plans very popular during droughts, not very popular in
non droughts.
Speaker 1 (05:16):
Plants the extraordinary cost of keeping them running.
Speaker 2 (05:19):
The other thing about them, they're really long concessions, so
people might have a ninety nine year concession on this
and ownership of an infrastructure as it that's really impealing
to investors as well.
Speaker 1 (05:31):
I love the way you brought that back around from
me trying to list sexy infrastructure and you actually brought
it back to something that gives value to people listening
to this. So well done, and thank you for saving me.
Speaker 2 (05:41):
Not at all, Michael, anytime.
Speaker 1 (05:43):
All right, if you've got your own question that you
would like to ask them, please send it on through
via the website Fearangreed dot com dot au or jump
onto any of the social media platforms and send it
through there. I'm Michael Thompson and this was asked Fear
and Greed
Welcome to Ask Fear and Greed, where we answer questions
about business, investing, economics, politics and more. I'm Michael Thompson
and hello, Sean Alma.
Speaker 2 (00:12):
Hello Michael Shaw.
Speaker 1 (00:13):
On something a little bit scintillating, a little bit sexy today. Infrastructure?
Speaker 2 (00:20):
Sure, oh, is there not a more scintillating word in
the English language? And infrastructure?
Speaker 1 (00:27):
If there is, I'm yet to find it, Sean. And
the question today is why are infrastructure assets seen as
safe in inverted commas investments.
Speaker 2 (00:39):
Because they're not sexy?
Speaker 1 (00:42):
Michael, I suppose that's actually a really good way to
put it. It is not a huge amount sexy about
a toll road or an airport or a nice name.
Speaker 2 (00:52):
So for most people investing, we'll talk about managed funds
which invest in infrastructure, all listed infrastructure, things like Trends,
Urban at Las, Arteria. They're big toll road companies here
in Australia. Mostly it's because they are actually boring. That's
why they have these people like them, because they have
(01:12):
what they call defensive characteristics. No matter what's going on
in the world, they just plod along, continue growing, continue
doing their thing. Really predictable cash flows. So toll roads,
for example, people that cross you know, a bridge or
major freeway, they tend to do it the same number
(01:34):
of times every week, people driving to work on it,
so really stable cash flows. Often these cash flows are
inflation linked, so when we had a breakout of inflation,
people end up paying high tolls. For example. These are
very government backed, so sometimes in the energy area and
utilities area, government determines how much prices can increase, but
(01:59):
they do increase them. Often they're linked to inflation, so
they've got a good cash flow. Inflation linked revenue streams.
They don't correlate that well to broader equities, So when
you buy stocks, you actually want some that go up
when others go down and some that go down when
others go up. Well, you probably never want them to
going down, to be perfectly honest, but you don't want
(02:21):
them all always going in the same direction because if
you have that the one you know, if they're going down,
they're all going down. You're not doing so well. So
kind of even within an equity portfolio, you want defensive stocks,
and that's where listed infrastructure do a really really good
job and just kind of whole sort of structure of
(02:42):
public money to infrastructure governments spend money on roads and
schools and bridges and hospitals, so we know that this
that provides an enormous support for infrastructure. So they're just safe,
a lot.
Speaker 1 (02:57):
Of stability, and so this is why then we see
so much money coming from the big super funds, the
big international pension funds that are all looking for these
infrastructure assets because it gives them stability over a longer
period of time.
Speaker 2 (03:09):
Yeah, exactly right. I mean the great example at Sydney
Airport used to be listed on the AASEX. It was
purchased by a bunch of super funds because it's just stable.
So if you mean, they know what they're going to
get out of Sydney Airport and so they took it
off the course and that's what they're getting. And so
the members of those super funds are benefiting from it.
(03:29):
They're just stable. Is boring, Michael boring?
Speaker 1 (03:33):
Is there only a relatively limited number of assets available
in infrastructure and not so much limited, but I mean
they're not exactly something that you can just whip up overnight.
You can't just quickly whip up a new airport or
a new kind of toll road or something. These are
It feels like there's also not a great amount of
change happening within that space.
Speaker 2 (03:54):
Yes, to some extent, you could argue that things like
poles and wires infrastructure. We need a lot of those
to carry renewable energy from wind farms and solar farms.
So that's a really hot area of infrastructure at the moment,
and that's not unlimited, but there's a huge demand for
(04:14):
it still, so certain areas, I mean around AI. Now
it depends how you think about data centers, but some
could argue they become essential infrastructure and there'll be plenty
of demand for that. I agree, like roads and bridges,
and they all have to be upgraded and new roads
come as you develop new areas, but that's probably a
(04:36):
bit more boring. You don't get many new airports, I mean,
there is one being developed in Western Sydney at the moment.
So many classes within infrastructure, there is a limited opportunity.
But then there are some of those growth areas that
we're talking about, poles and wires, data centers, that type
of thing.
Speaker 1 (04:56):
There really is something quite there, actually is something quite appealing,
something sexy, something sexy about certain types of infrastructure, like
an airport that is. Yeah, that's pretty cool. A desalination
plant sean oh yes.
Speaker 2 (05:10):
Detail plans very popular during droughts, not very popular in
non droughts.
Speaker 1 (05:16):
Plants the extraordinary cost of keeping them running.
Speaker 2 (05:19):
The other thing about them, they're really long concessions, so
people might have a ninety nine year concession on this
and ownership of an infrastructure as it that's really impealing
to investors as well.
Speaker 1 (05:31):
I love the way you brought that back around from
me trying to list sexy infrastructure and you actually brought
it back to something that gives value to people listening
to this. So well done, and thank you for saving me.
Speaker 2 (05:41):
Not at all, Michael, anytime.
Speaker 1 (05:43):
All right, if you've got your own question that you
would like to ask them, please send it on through
via the website Fearangreed dot com dot au or jump
onto any of the social media platforms and send it
through there. I'm Michael Thompson and this was asked Fear
and Greed
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