Unlisted Infrastructure Offers Stable Retirement Income
This demonstrates that industry funds are more invested in this asset class.
Sandra Lee, head of private markets at UniSuper, argues that unlisted infrastructure can fulfill multiple portfolio objectives. With 14 years as UniSuper’s infrastructure investment manager before her current role, Lee emphasizes its potential for long-term growth, access to essential assets, and inflation-linked returns.
Essential assets like airports, toll roads, and utilities remain in use regardless of economic conditions. Lee observes, “Despite economic cycles, people will still use those assets.”
However, she cautions that valuation and entry prices pose significant risks, particularly for wealth accumulators who prioritize capital growth over immediate income.
UniSuper adopts a long-term strategy for unlisted infrastructure, aiming to actively participate in decision-making within these companies. For instance, Lee serves as a non-executive director at Sydney Airport.
In retirement, cash flow uncertainty increases. Lee highlights the inflation-linked nature of unlisted infrastructure, especially in regulated assets with revenues tied to inflation. She contrasts this with private equity, where returns rely more on operational improvements and exit timing.
Lee asserts that unlisted infrastructure’s primary role is to generate predictable cash flows and growing income, often with inflation linkage. This becomes more critical as investors shift from accumulation to retirement, when income stability takes precedence.
Lee states, “Infrastructure’s income, or yield, is a core feature because it is relatively predictable.” She adds, “The purpose for us is to generate more stable cash flows, growing income, and it provides us diversification from the listed equity cycles.”
In retirement portfolios, unlisted infrastructure offers a balance between growth and income, providing defensive characteristics that complement other asset classes. As Lee suggests, its predictable cash flows and inflation linkage make it a valuable component of a diversified strategy.
