Recent in-depth analysis by leading Australian investment manager QIC reveals that the effects of interest rate hikes on infrastructure are likely to be complex and diverse – even positive – depending on the circumstances of each market, sector and asset.
The research responds to concerns that moves by the U.S. Federal Reserve to normalise monetary policy and raise interest rates, with the European Central Bank and Bank of England set to follow suit, will undermine the performance of investments, including infrastructure assets.
In a new Red Paper titled, “The impact of higher interest rates on infrastructure: nuanced, not black and white,” QIC explores the dynamics of global macroeconomic and demographic trends, their interplay with interest rates, and the combined impact on infrastructure investments. Supported by named case studies, the study investigates:
1. Forces acting against inflation
3. The sector’s strong ability to manage interest rate risk
“It’s easy to have a knee-jerk pessimistic reaction to the end of negative interest rates and quantitative easing,” said Ross Israel, Head of Global Infrastructure, QIC. “But there are several factors to consider. Firstly, multiple pressures will likely keep official interest rates rising slowly and stop them short of historic levels. Secondly, the effects on infrastructure assets could be positive or negative, depending on a range of market and asset factors. And finally, the infrastructure sector is notably resilient, with a range of ways in which to mitigate risk.”
Read more about QIC’s study The impact of higher interest rates on infrastructure: nuanced, not black and white here.
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QIC is a global diversified alternative investment firm offering infrastructure, real estate, private equity, liquid strategies and multi-asset investments. It is one of the largest institutional investment managers in Australia, with A$82.9 billion (US$65.0/£46.6 billion) in funds under management, offering infrastructure, real estate, private equity, liquid strategies and multi-asset investment services. QIC has over 700 employees and serves more than 110 clients including governments, pension plans, sovereign wealth funds and insurers, spanning Australia, Europe, Asia, Middle East and the US. Headquartered in Brisbane, Australia, QIC also has offices in New York, San Francisco, Los Angeles, London, Sydney, and Melbourne. For more information, please visit: www.qic.com.
About QIC’s Global Infrastructure business:
QIC is a long-term infrastructure investor with an established global platform. We currently manage A$9.6 billion (US$7.5 billion/£5.6 billion) across 12 global direct investments, having realised a further A$7.3 billion (US$5.7 billion/£4.3 billion) of investments for our clients. Our sector centric investment strategy deconstructs risk across sector value chains identifying relative value for investment. This drives a targeted origination approach which has seen us build diversified portfolios for our clients, protecting their capital while delivering strong total returns since 2006.
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