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Infrastructure offers income and diversification at a price

Bargains are scarce but here's where the best opportunities lie
Infrastructure offers income and diversification at a price

There were few places to hide in 2018, a dismal year for most investments. But infrastructure investment trusts were a notable – and perhaps unlikely – exception, as the sector has been buffeted by mounting political risk, the collapse of a bellwether stock and a shift in interest rates. As a result, few would have thought infrastructure was a compelling option at the start of 2018.

The Labour party had reiterated its plans to renationalise key industries and take private finance initiative (PFI) contracts back into government hands. Construction giant Carillion collapsed, overwhelmed by the weight of its debts, and this company provided facilities management for projects in which some of the infrastructure trusts invest. The threat of higher interest rates also threatened to undermine the value of the income from infrastructure investments, a key part of their appeal.

Yet all the infrastructure trusts have made gains over the 12 months to 21 January 2019 – as much as 27.5 per cent in the case of 3i Infrastructure (3IN), according to Financial Express. This has come from both a rise in the trust's underlying assets and rising premiums.

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