Infrastructure has historically drawn the attention of institutional investors. But now individual investors are starting to take notice.
For the savvy private wealth investor, portfolio diversity is key to success. Investing in infrastructure is one option that can help you both optimize your portfolio and make a positive and meaningful impact on your local community.
Infrastructure investment options
Tangible assets with intrinsic value have drawn renewed attention from a variety of investors seeking opportunities that offer lower correlation to traditional asset classes.
While institutional investors may have once been the most natural fit for infrastructure investments, the risk profiles of individual high-net-worth investors – seeking long-term, stable returns – are proving to make infrastructure investments a good fit for them, as well.
Private debt and debt securities, such as municipal bonds (munis) issued by local and state governing bodies, offer tax advantages for high-income investors. Investors who choose to loan their capital as munis to local governments benefit from tax-free interest. For investors in states with higher income taxes, for example, California, New York and others, the taxable equivalent returns on lower risk municipals can approach equity-like returns in the current market.
Munis also make for a diverse portfolio addition, because as an investor you’re not investing in one specific asset, project or building. Invested capital funds public infrastructure, from roads and green spaces to water systems and K-12 public education buildings. Infrastructure investments that are slightly higher in risk are stadiums, convention centers, hospitals and universities.
Underwriting state and local housing agencies for single-family mortgages and multifamily housing projects are an attractive option for investors looking to broaden their portfolio exposure to encompass more housing – and therefore infrastructure – investments.