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Infrastructure
Building for growth: Unlocking the power of infrastructure assets
The modernization of our infrastructure is essential to fostering a growing and equitable economy. Institutions are tuning into what we believe is a generational opportunity, not only for the potential portfolio benefits listed below, but as a powerful way to invest in the trends that will shape the future of our economy.
INVESTMENT ACTIONS
Portfolio positioning
Unlocking the power of infrastructure assets
In a market regime of higher macro and market volatility, infrastructure assets are poised to offer stable returns, inflation protection, diversification benefits and an opportunity to drive the energy transition forward.
Infrastructure as a potential inflation hedge
Living with inflation
The figures shown relate to past performance. Past performance is not a reliable indicator of current or future results.
Source: Bloomberg, Barclays. EDHEC for Infrastructure equity; NCREIF for Global Real Estate; MSCI for Global Equities; and BBG Barclays Global Aggregate Index TR for Global fixed income, as of May 22, 2023 (annual data since 2001). The charts are based on an illustrative US economic scenario. Past performance is not indicative of future results. You cannot invest directly in an unmanaged index. High growth periods are when U.S. GDP > 2.5% and Low growth periods are when U.S. GDP < 2.5%. High inflation periods are when U.S. CPI > 2.5%.
Staying ahead of inflation with infrastructure assets
Infrastructure is a unique asset class with characteristics that can provide resilience in the current rising rate and high inflationary macroeconomic environment.
Historical infrastructure outperforms during high inflationary times
The returns of private infrastructure companies tracked in the EDHEC 300 index increased by 23% through low growth and high inflation scenarios.
Explicit linkages to inflation
Infrastructure assets have long-term revenues that are often contracted or regulated in nature, with examples including power purchase agreements (“PPAs”) or take-or-pay contracts.
Building more resilient portfolios
A dedicated infrastructure position, held as part of a broadly diversified long-term portfolio, has the potential to increase both the efficiency and durability of the portfolio’s returns.
Source: BlackRock, May 22, 2023, based on BlackRock's Capital Market Assumptions. Expected Returns are net of fees and expenses and calculated using a model fee equal to 0.30%, which represents the highest advisory fees charged for an institutional client. Expected returns also reflect reinvestment of dividends, capital gains, and interest but do not reflect the deduction of taxes. Had that expense been deducted, performance would have been lower. There is no guarantee that the capital market assumptions will be achieved, and actual risk and returns could be significantly higher or lower than shown. Hypothetical portfolios and risks shown are for illustrative discussion purposes only and no representation is being made that any account, product or strategy will or is likely to achieve results similar to those shown. Expected risk is calculated using the expected volatility assumptions. Expected risk is defined as annual expected volatility and is calculated using data derived from portfolio asset class mappings, using the Aladdin portfolio risk model. This proprietary multi-factor model can be applied across multiple asset classes to analyze the impact of different characteristics of securities on their behaviors in the marketplace. In analyzing risk factors, the Aladdin portfolio risk model attempts to capture and monitor these attributes that can influence the risk/return behavior of a particular security/asset. See "Capital Market and Modeling Assumptions". Past performance is not a guarantee or reliable indicator of future results.
Equity and fixed income relationship
The Great Moderation saw long-term bonds work as a cushion against risk asset selloffs. We think this era is over and strategic infrastructure allocations can help make portfolios more resilient.
Low correlation to other asset classes
Infrastructure equity exhibits low correlation to traditional asset classes due to its idiosyncratic characteristics.
Diversification benefits.
Our research finds that adding infrastructure to a traditional 60/40 portfolio, could increase returns while diversifying risk. The optimal portfolio allocation has a 35% exposure to infrastructure.
The New Infrastructure Blueprint
We explore the major structural forces driving what’s poised to be a transformational moment in infrastructure investing. And we dive into the various ways capital can invest in the opportunities that we’re seeing today as well as the ones we’re expecting, and how investors can incorporate the asset class into their portfolios.
Infrastructure: opportunities for today’s portfolio challenges
Investing in energy, transportation and digital ecosystems presents a unique investment opportunity as economies worldwide upgrade infrastructure to meet evolving needs. Watch our latest Market Pulse to discover diverse infrastructure solutions in public and private markets and their potential benefits for portfolios.
BlackRock Investments
Infrastructure in action
Infrastructure investments impact on the world
Infrastructure investments offer institutions the opportunity to invest in the transformative building blocks of our economy and support the transition to a more technology-driven world. We believe that BlackRock’s global reach, deep experience and sourcing prowess make the foundations of an infrastructure investment platform investors can build on with confidence
STRATOS: A direct approach to carbon emission
Once fully operational, this direct air capture facility in Texas will remove and securely store up to half a million tonnes of CO2 from the atmosphere annually.
Gigapower
Gigapower is a joint venture with AT&T to build a commercial, wholesale open-access fiber optic network delivering multi-gigabit speeds to an initial 1.5 million customer locations, with AT&T as its anchor tenant.
Supporting communities: Zacatecas Wind Farm
We believe it is critical to consider the potential impact of our investment on communities, including Indigenous Peoples. Learn how we worked with the indigenous Huichol community to power 162,000 households in Mexico here
Latest insights on infrastructure
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Capital at risk. All financial investments involve an element of risk. Therefore, the value of the investment and the income from it will vary and the initial investment amount cannot be guaranteed.
The material is for information purposes only. It is not intended for and should not be distributed to, or relied upon by, members of the public.
It is not intended to be a forecast, research or investment advice, and is not a recommendation, or an offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are subject to change. References to specific securities, asset classes and financial markets are for illustrative purposes only and are not intended to be and should not be interpreted as recommendations. Reliance upon information in this material is at the sole risk and discretion of the reader. The material was prepared without regard to specific objectives, financial situation or needs of any investor.
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