With the Chinese continuing to build ports, airports and roads to support their booming economy, the developed countries replacing ageing energy pipelines and the other BRIC nations of Brazil, Russia and India developing at breakneck speed, global infrastructure must be a consideration for a well diversified portfolio.

Infrastructure describes the physical assets that provide essential services to society. Around the world billions of people rely on infrastructure to live and do business. From airports we travel through, toll roads we drive on and the water we drink - infrastructure assets are the backbone of any economy.

Risk and return

The key attraction of infrastructure as an asset class is its sustainable growth profile, which is relatively immune to economic cycles.

Over the last decade, global infrastructure securities have delivered total returns between 10% and 12% per annum, including a 4% distribution yield*. Risk has been in line with global property securities and below global equities.

Importantly, the correlation with global equities has been relatively low, reinforcing the value of infrastructure assets in a well diversified portfolio and offering sustainable growth and predictable cashflows, both of which are attractive in the uncertain economic conditions we have today.

The Fund invests in infrastructure and utility companies, which control assets with monopolistic characteristics. The assets should have sustainable growth, high barriers to entry, strong pricing power and predictable cash flow. The Fund targets companies with robust business models and strong management execution.

First State Global Listed Infrastructure

Thomas' Top 20 features the First State Global Listed Infrastructure fund run by Peter Meany, which we believe is an excellent way to access the sector, if it is of interest.

The listed Infrastructure team's investment philosophy is based on security selection, which aims to balance value and quality. They employ a pragmatic approach to ensure they only invest in quality assets at fair value. Peter and the team assess investment options in absolute terms and look for the best investment ideas to create a balanced portfolio. Their specialised knowledge provides them with a globally consistent investment process to ensure value is added over the long term.

The Fund invests in infrastructure and utility companies, which control assets with monopolistic characteristics. The assets should have sustainable growth, high barriers to entry, strong pricing power and predictable cash flow. The Fund targets companies with robust business models and strong management execution.

Specific Infrastructure risks

Interest rate risk
Movements in interest rates may adversely impact infrastructure securities.

Regulatory and political risk
Changes in regulation or government policy may adversely impact the operating environment and the value of infrastructure securities.

Exogenous events
Infrastructure assets may be impacted by exogenous events. For example, the essential nature of infrastructure assets may increase the risk of terrorist attacks or natural disasters.

Operating risk
The Fund will be exposed to the operating risk of the underlying infrastructure businesses.

These risks are minimised through portfolio diversification and detailed fundamental analysis. As a general rule, the Fund invests in companies which are relatively under-geared, operate in constructive regulatory and political environments and have robust business models which reduce operating risk.

If this is of interest then you will find this fund in Thomas' Top 20