Why Invest in Infrastructure?
Infrastructure investing is a unique asset class that has recently gained cachet as investors search for long term stable returns that provide inflation protection. Over the last two to three years, the overall growth of private infrastructure investing has grown tremendously; more than $1.7 trillion has been invested in infrastructure assets globally. Fundraising of infrastructure funds has raised more than $200 billion since 2006.
What are infrastructure assets? Core infrastructure assets typically consist of roads, bridges, tunnels, ports, airports, water distribution, and power generation. These are physical assets with economic lives of 25- 50 years. Over the years the investment strategies and types of assets have expanded in into gray areas of investing beyond the traditional “boring” infrastructure assets.
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Upgrading the emerging world’s infrastructure is likely to be one of the themes dominating global investment in the next few years. Emerging market spending is booming as populations are growing and urbanizing. This is straining existing infrastructure resources and leading to acute demand for electricity, water and sanitation. Despite recent falls in commodity prices, strong economic growth has granted resource-rich governments’ significant capital to dedicate towards infrastructure investment.
Owning part of one of the world’s first fully electronic toll roads in Melbourne, the Chicago Midway Airport or a local hydroelectric project may sound like an unusual investment, but these types of assets continue to gain increasing traction as an attractive avenue for the placement of new capital. Portfolio allocations to infrastructure are increasing, with investors enticed by the asset class’ elongated investment horizon. The natural life cycle of infrastructure assets are long, making them an attractive alternative to government bonds in terms of liability matching. A further appeal is revenue streams often have regulated price increase mechanisms that explicitly consider the rate of inflation.
Already firmly established in Australia, Europe and Canada, infrastructure as an asset class is growing rapidly elsewhere. Developing countries are crying out for high levels of investment in the infrastructure they need to support their growing economies and expanding, wealthier populations. At the same time, in the developed world, existing infrastructure is now beginning to falter after long periods of underinvestment.
How Can I Invest in Infrastructure Assets?
An innovative startup called InfraShares is helping to make infrastructure investment available to the retail investor, thanks to recent federal action that paved the way for unaccredited retail investors to participate in the financing of infrastructure projects.
In simplest terms, InfraShares brings crowdfunding to infrastructure projects. It’s similar in setup to a Kickstarter product launch or a GoFundMe charity drive, only in this case, the money is raised by offering securities rather than seeking a donation. Platforms like InfraShares operate under Regulation Crowdfunding which allows issuers to list their offerings on SEC/FINRA regulated funding portals to promote their project or company.
Projects on InfraShares can range from a preferred equity investment in a wastewater treatment plant development, to a debt offering for a rehabilitation of a small hydro project, to common shares of a startup that’s developed intelligent drone technology to make inspection of bridges, railroad trestles and highway overpasses safer and more efficient.
To get started, an investor registers with InfraShares and browses various investment opportunities, receiving pertinent details of projects offered by highly vetted infrastructure companies. Investors then choose a project and make an investment through the site. All funds are held in escrow until the project’s unique funding goal is reached, when the investor becomes a shareholder and can track investment returns and receive project updates through InfraShares’ Investor Dashboard. If the project’s minimum funding goal is not reached, 100% of initial investments are returned.
Who can take advantage of these opportunities? Regulation CF allows for anyone to invest (being an accredited or institutional investor is not required). And because the investment thresholds are so low (often as little as $500 minimum investment), everyone can be looking at these offerings to help diversify their portfolios.
He added that the InfraShares offerings are particularly appropriate for “investors who are looking for opportunities to make a small investments in an alternative asset class while also making an impact with their investment by supporting infrastructure projects that will help the community, improve the water system, develop renewable energy, and support a strong society and a strong economy.”
To learn more: https://invest.infrashares.com/offerings
InfraShares was co-founded by Brian Ross in 2017 after seeing the need for a funding portal focused on infrastructure. He has over 20 years of experience in the development of major infrastructure projects ranging from working as a union laborer to managing infrastructure assets for private equity firms. His unique combination of experience in construction, engineering, and finance allow him to work effectively with project sponsors in raising capital. He holds an MBA from UC Berkeley Haas School of Business and a Masters’ in Civil Engineering from Stanford University.