The power of infrastructure

The power of infrastructure

In this inflationary environment, we believe the infrastructure sector should continue to be much more insulated than other segments of the equity markets.

If economic stagflation continues this year, we think the backdrop for defensive businesses, particularly those exposed to themes such as the aging demographic and the energy transition, is as constructive as it has ever been.

In 2023, the oldest baby boomer is set to turn 77 years old, entering a phase during which alternative housing, which can be more conducive to the lifestyle of an older adult, often becomes desirable.

As this key demographic continues to age and the world recovers from the Covid-19 pandemic, our society may need more social infrastructure to support its increasing demands. Aged-care facilities, senior housing options and greater hospital capacity should invariably be necessary, and investors could benefit from this expected growth. We expect the healthcare REIT segment to remain an area for opportunity in 2023.

As for the global push toward a lower-carbon future – as initiatives and regulations continue to support net zero objectives, regulated utilities may need to convert their generation fleets to more sustainable sources. This process could drive regulated utilities to grow more rapidly than ever. Faster-rate base growth should lead to faster earnings growth and, likewise, faster dividend growth.

With the continuation of energy supply restraints and the continuing war between Russia and Ukraine, the notion of committing capital to renewable-energy solutions has become increasingly desirable. Nowhere is the energy cost-of-living crisis greater, and the political motivation to hasten renewable-energy growth stronger, than in Europe. This is where we continue to see the greatest opportunity for value creation in 2023.

Jim Lydotes, global infrastructure manager, Newton Investment Management

Disclosures

All investments involve risk, including the possible loss of principal. Certain investments involve greater or unique risks that should be considered along with the objectives, fees, and expenses before investing.

The assets listed should not be considered recommendations to buy or sell a security.

“Newton” and/or the “Newton Investment Management” brand refers to the following group of affiliated companies: Newton Investment Management Limited (NIM) and Newton Investment Management North America LLC (NIMNA). NIM is incorporated in the United Kingdom (Registered in England no. 1371973) and is authorized and regulated by the Financial Conduct Authority in the conduct of investment business. Both Newton firms are registered with the Securities and Exchange Commission (SEC) in the United States of America as an investment adviser under the Investment Advisers Act of 1940. Newton is a subsidiary of The Bank of New York Mellon Corporation. Newton’s investment advisory businesses are described in their Form ADVs, Part 1 and 2, which can be obtained from the SEC.gov website or obtained upon request.

Recent market risks include pandemic risks related to COVID-19. The effects of COVID-19 have contributed to increased volatility in global markets and will likely affect certain countries, companies, industries and market sectors more dramatically than others.

This material has been provided for informational purposes only and should not be construed as investment advice or a recommendation of any particular investment product, strategy, investment manager or account arrangement, and should not serve as a primary basis for investment decisions. Prospective investors should consult a legal, tax or financial professional in order to determine whether any investment product, strategy or service is appropriate for their particular circumstances. Views expressed are those of the author stated and do not reflect views of other managers or the firm overall. Views are current as of the date of this publication and subject to change.

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