Efforts to decarbonize the world’s infrastructure will open up massive opportunities for investors, according to Shane Hurst, portfolio manager at ClearBridge Investments, a global investment manager headquartered in New York City with $190.7 billion in assets under management.
Infrastructure investments are particularly attractive during inflationary times. The opportunities presented by infrastructure investments versus global equities comes against a backdrop of forces created by rising interest rates, contracting balance sheets, elevated geopolitical risk and potentially slowing global growth, Hurst said in an interview.
Amid the conflicting global trends, Hurst said he believes, “Climate-change related spending on energy infrastructure, huge infrastructure spending programs in the United States and Australia, and ongoing global population growth will continue to support infrastructure companies in 2022 and beyond.”
ClearBridge holds a portfolio of stocks with between 30 and 60 companies that are globally diversified and sector diversified.
Increases in spending on rail and air travel infrastructure are anticipated worldwide, further boosting the channel. At the same time, any industry, such as travel, that can pass interest rate increases through to consumers is attractive to investors, Hurst said. “There will be a continuing demand to get off of Russian oil, which will mean more investment opportunities in renewable energy and liquefied natural gas and in energy transportation facilities.”
Retail investors could have 3% to 10% of their portfolios devoted to global infrastructure, while pension funds and other institutional investors could have as much as 15% of the portfolios in infrastructure investments.
“Predictions are that there will be massive investments worldwide on decarbonization projects, with just utilities spending $30 trillion to $36 trillion by 2050. Likewise, growth in solar and wind projects is expected to increase by six times current spending by 2030. Investors should want to be exposed to that multi-decade growth,” Hurst said.
For the short term, people are starting to fly more and drive more following the pandemic, increasing the value in stocks related to these industries.
The communications and data sectors will continue their rapid growth and provide more investment opportunities. “There also will be a huge amount of investment as carriers roll out 5G capabilities,” the portfolio manager said.
Investors have “$300 billion in dry powder – cash that is waiting to be invested at the same time that there is a demand for these assets,” Hurst explained.