NEPC’s Matthew Ritter was recently featured in FIN News’ Q2 hiring analysis report. View the full article on FIN News’ site here.
Institutional commitments to private infrastructure funds increased in the second quarter given attractive characteristics—like providing an inflation hedge or cash yield—and product offerings that have gained steam in recent years, a trend that will likely continue into the second half of 2023 and beyond.
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“While private market budgets have been somewhat muted in 2023, investment consultant NEPC expects to see continued growth and interest in infrastructure investing.
“Those mandates or those new commitments follow a trend in recent years of more and more investors adding infrastructure as a target allocation in their overall portfolio,” NEPC Partner Matthew Ritter said.
NEPC’s Quarterly Asset Class Review for the second quarter found that the Standard & Poor’s Global Infrastructure Index, which tracks 75 companies globally across the listed infrastructure space within a sector breakdown that includes utilities, industrials and energy, was “flat” for the quarter at -0.1%.
However, NEPC noted that it “continues to “favor private markets when it comes to implementing infrastructure in a portfolio.””
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“NEPC’s Ritter, who heads the Boston-based firm’s Real Assets Investments Team, has also noticed growth in infrastructure strategies in recent years.
“That growth is continuing and perhaps more importantly, this space has evolved quite a bit and so infrastructure today offers investors a much wider array of strategies than was available even just a few years ago. There may be attractive investment opportunities regardless of what an investor’s return objectives or risk appetite might be,” he said.”
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“NEPC finds there are attractive opportunities in the more thematic areas of infrastructure such as digital and communications.
“Some of the themes that we are focused on are segments of the infrastructure market that have very strong and resilient demand tailwinds, so more specifically that would be things like digital infrastructure and capitalizing on the continued growth of data consumption and transmission globally, as well as energy transition themes. So, not just renewable power generation but also all the ancillary assets, infrastructure services, that come along with that, whether it’s improving electricity transmission [or] grade upgrades,” Ritter said.”
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“Ritter, who has been with NEPC for over 11 years covering real asset investments, indicated that at a high level, infrastructure can provide a lot of benefits to a portfolio like current income, diversification, but it is also reflective of what else is going on in client portfolios.
“More specifically for some clients, you’re seeing infrastructure as an alternative to more traditional oil and gas strategies that may have previously made up a real asset allocation. Across private markets, there may be some more uncertainty in places like real estate or some private equity strategies that [we] think infrastructure is seeing the benefits of,” he said.
“Infrastructure can provide diversification benefits just by the nature of having demand drivers and cash flow that is generally not correlated to things like GDP growth, and that results in generally low correlation to traditional stock and bond-types of investment opportunities,” Ritter continued.”