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CONTRIBUTORS

Tony Davidow, CIMA®

Senior Alternatives Investment Strategist
Franklin Templeton Institute

Priya Thakur, CFA

Analyst
Franklin Templeton Institute

Preview

Bridges, roads and airports are often what comes first when we think of as forms of infrastructure; however, infrastructure represents a varied and vast set of systems that connect and propel a society. They include such diverse areas as cell towers, fiber-optic cables and water treatment facilities.

As Mark Zuckerberg recently noted:

There is a huge need and a huge opportunity to get everyone in the world connected, to give everyone a voice and to help transform society for the future. The scale of the technology and infrastructure that must be built is unprecedented, and we believe this is the most important problem we can focus on.”

In this paper, we will examine investing in infrastructure and cover the following:

  • What is infrastructure?
  • How can we categorize infrastructure?
  • Why is now a good time to invest?
  • What lessons can be learned from institutions?
  • What role does infrastructure play in client portfolios?

In our view, infrastructure represents a compelling investment option due to its unique characteristics, the prevailing market environment, and the versatile role these types of assets can play in client portfolios. We believe that the macro themes identified above should play out over the next several years. Fortunately, we are beginning to see more products coming to the wealth channel.

WHAT ARE THE RISKS?

All investments involve risks, including the possible loss of principal.

Equity securities are subject to price fluctuation and possible loss of principal.

International investments are subject to special risks, including currency fluctuations and social, economic and political uncertainties, which could increase volatility. These risks are magnified in emerging markets. Investments in companies in a specific country or region may experience greater volatility than those that are more broadly diversified geographically.

Companies in the infrastructure industry may be subject to a variety of factors, including high interest costs, high degrees of leverage, effects of economic slowdowns, increased competition, and impact resulting from government and regulatory policies and practices.

Small- and mid-cap stocks involve greater risks and volatility than large-cap stocks.

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IMPORTANT LEGAL INFORMATION

This material is intended to be of general interest only and should not be construed as individual investment advice or a recommendation or solicitation to buy, sell or hold any security or to adopt any investment strategy. All investments involve risks, including possible loss of principal. There is no guarantee that a strategy will meet its objective. Performance may also be affected by currency fluctuations. Reduced liquidity may have a negative impact on the price of the assets. Currency fluctuations may affect the value of overseas investments. Where a strategy invests in emerging markets, the risks can be greater than in developed markets. Where a strategy invests in derivative instruments, this entails specific risks that may increase the risk profile of the strategy. Where a strategy invests in a specific sector or geographical area, the returns may be more volatile than a more diversified strategy.

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