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How do infrastructure investments work?

Infrastructure is just one of many asset classes that investors can have in their investment portfolio – but how do they work, and how can you access them?

  • Infrastructure represents the physical assets necessary for the smooth operation of people, businesses and society. But did you know you can invest in infrastructure too?


    You can access these investments by pooling your money with other investors to buy units in a listed or unlisted fund which holds a number of infrastructure assets. This offers you access to a range of infrastructure assets across a range of sectors – like toll roads, water lines, transportation systems and radio towers.


    Infrastructure investments can be listed on the share market or unlisted.


    Listed infrastructure funds can more easily buy and sell investments, which means they can take advantage of changing market conditions. However, this can also make them more exposed to share market fluctuations, meaning their values can change from day to day and make them higher risk.


    Unlisted infrastructure funds may be less able to change their investments. But as these investments are not listed on share markets, their values can be more stable and less volatile over time. It can help to speak to a financial adviser when considering your options.


    Wherever you stand on investments and super, we’re here to help you get to where you need to be. 

What are infrastructure investments?

Infrastructure encompasses the physical assets necessary for the smooth operation of people, businesses and society. These assets can also include transportation, public housing, utilities, communication, and infrastructure for renewable energy. Today, investors can access these investments without spending the large sums of money often associated with buying one directly. This involves you pooling your money with other investors to buy units in a fund or trust.

How can you access these investments?

Infrastructure investments may be accessed within super (depending on your super fund’s allocation to different investments), or outside of super through a listed or unlisted fund or trust:

  • Listed infrastructure investments in a fund or trust are listed on the share market. This makes them more liquid – that is, more easily traded and converted into cash. However, share markets can also fluctuate regularly, making these investments higher risk.
  • Unlisted infrastructure investments can work in a similar way. However, these investments are not listed on the share market, meaning the fund or trust may not have an official, regulated marketplace for trading. You may also be required to hold these investments until the fund is wound up, meaning they are less liquid and therefore more difficult to trade.
  • Both listed and unlisted funds can be single-sector funds (invested in one sector of the market) or diversified funds (invested across multiple sectors of the market) – investing in a range of assets across different sectors, like transport, telecommunications and utilities.

What can impact infrastructure investments?

There are risks associated with all investments, including infrastructure. For example: 

  • Share markets fluctuate regularly for a number of reasons – influenced by factors such as economic developments, wars, civil unrest, pandemics and even the weather. This means that the value of infrastructure investments listed on share markets can rise and fall in a similar way to shares – making them potentially more volatile.
  • While investors in unlisted infrastructure investments may benefit from not being exposed to share market fluctuations, these investments also don’t have a regulated marketplace for trading. This could potentially make their values less transparent as prices are determined not by markets, but by investment professionals managing the fund or trust. Because unlisted investments don’t have an official trading place, they may also be harder to buy and sell – meaning, investors may be need to hold them until the fund is wound up.

How do infrastructure investments generate returns?

Both listed and unlisted infrastructure investments have the potential to offer attractive, risk-adjusted returns over the long term – typically through income that is paid to investors of a fund or trust through regular distributions.

Why invest in infrastructure?

What you choose to invest in will depend largely on your personal circumstances, age, life stage as well as the advice you may receive from a financial adviser. Investments in listed and unlisted infrastructure can be considered higher-risk growth investments – however, they also have the potential to deliver higher returns over the long term. For this reason, many investors with decades to retirement may choose these investments as they will have more time to ride out any impacts from market fluctuations and generate returns. Consider speaking with a financial adviser to help determine whether these investments are right for you based on your personal circumstances.

Disclaimer

Information on this webpage is provided by Avanteos Investments Limited ABN 20 096 259 979, AFSL 245531 (AIL) and Colonial First State Investments Limited ABN 98 002 348 352, AFSL 232468 (CFSIL). It may include general advice but does not consider your individual objectives, financial situation, needs or tax circumstances. You can find the Target Market Determinations (TMD) for our financial products at www.cfs.com.au/tmd, which include a description of who a financial product might suit. You should read the Financial Services Guide (FSG) available online for information about our services. This information is based on current requirements and laws as at the date of publication.

Tax considerations are general and based on present tax laws and may be subject to change. You should seek independent, professional tax advice before making any decision based on this information.

AIL and CFSIL are not registered tax (financial) advisers under the Tax Agent Services Act 2009 and you should seek tax advice from a registered tax agent or a registered tax (financial) adviser if you intend to rely on this information to satisfy the liabilities or obligations or claim entitlements that arise under a tax law.