Commenting on the investment outlook for renewable energy and infrastructure in 2018, Jamie Richards, Partner at Foresight said:
“We expect infrastructure to become an increasingly popular asset class for investors in 2018 as it mitigates four of the biggest headwinds facing portfolios: volatility, a market correction, inflation and interest rate rises.
“This is borne out by a recent study1 Foresight conducted among financial advisers, which shows that three-quarters (75%) are bullish about the investment outlook for UK infrastructure assets and the majority (59%) expect to see increasing demand amongst investors for exposure to the sector through SIPPs and ISAs over the next five years.
“Infrastructure is an attractive asset class because assets are characterised by stable and predictable demand, high barriers to entry and long term contracted revenue streams. In addition, the UK listed renewable energy and infrastructure funds and investment companies benefit from protection against inflation as a high proportion of underlying asset revenues are directly linked to inflation. The comfortable spread between listed UK renewable energy and infrastructure funds’ discount rates and the risk-free rate provides a further buffer to interest rate rises.
“The UK has seen unprecedented growth in renewable energy and infrastructure investment over the last five years and that is expected to continue for the foreseeable future. Indeed, the forecast for the next eight years shows a 27% increase in cumulative UK renewable energy generation2. Much of this investment has, and is expected to, come from UK listed renewable energy and infrastructure investment companies which have a combined market capitalisation of £17bn3. [The UK Government is a strong supporter of Infrastructure. This is evidenced by a variety of innovative infrastructure support initiatives that have been launched in recent years. Two examples include the formation of the Green Investment Bank, recently rechristened Green Investment Group, and the launch of the UK Guarantees Scheme. The Green Investment Group helps to fund the creation of new green infrastructure across the UK. The UK Guarantees Scheme provides a government-backed guarantee to help infrastructure projects access debt finance where they have been unable to raise finance in the financial markets.
“Foresight believes that renewable energy and infrastructure are attractive asset classes as they are characterised by stable and predictable demand, high barriers to entry and long term contracted revenue streams.
“We have seen strong demand from both retail and institutional investors for our recently launched FP Foresight UK Infrastructure Income Fund, which is actively managed and invests in UK listed renewable energy and infrastructure fund and investment company equities and bonds. It targets an annual income of 5% per annum with dividends paid quarterly.”
1Research conducted online with 206 UK financial advisers in September/October 2017
2Department for Energy and Climate Change, Updated Energy and Emissions Projections November 2015.
3London Stock Exchange: Total Market Cap of UK Listed Renewable and Infrastructure Investment Companies