Are infrastructure stocks really 'bond proxies'?

clock • 3 min read

The momentum behind infrastructure equities has slowed over the last 18 months, with concerns over interest rate rises and political factors seemingly undermining the investment case for the asset class.

This derives from the ‘bond proxy' argument, which essentially conflates infrastructure equities with bonds, whereby a rising interest rate environment will erode the value of the dividend yield. This can also impact returns as these stocks tend to have higher-than-average levels of debt, and this debt becomes more expensive as underlying risk-free rates rise.  Infrastructure equities do have many similar qualities to bonds. The regulated or long-term contracted nature of returns gives a degree of predictability, sustainability and resilience throughout the economic, business and product...

To continue reading this article...

Join Investment Week for free

  • Unlimited access to real-time news, analysis and opinion from the investment industry, including the Sustainable Hub covering fund news from the ESG space
  • Get ahead of regulatory and technological changes affecting fund management
  • Important and breaking news stories selected by the editors delivered straight to your inbox each day
  • Weekly members-only newsletter with exclusive opinion pieces from leading industry experts
  • Be the first to hear about our extensive events schedule and awards programmes

Join now

 

Already an Investment Week
member?

Login

More on Bonds

Join us today to discuss why 2024 is an attractive entry point for fixed income

Join us today to discuss why 2024 is an attractive entry point for fixed income

Sarka Halas
clock 25 March 2024 • 1 min read
Partner Insight: Moving from cash to corporate bonds ahead of cutting-cycles

Partner Insight: Moving from cash to corporate bonds ahead of cutting-cycles

Fidelity International

Ben Deane, Investment Director, Fixed Income - Fidelity International
clock 19 March 2024 • 13 min read
JP Morgan AM to wind up Sterling Bond fund as assets dwindle

JP Morgan AM to wind up Sterling Bond fund as assets dwindle

Fund size of £29m

clock 18 March 2024 • 1 min read
Trustpilot