To significant applause during his first address to a joint
session of Congress, President Donald Trump said: “The time has come for a new
program of national rebuilding.” He was referring to a proposed $1 trillion
spending plan to revamp America’s infrastructure that would span 10 years.
The measure will be immensely difficult to implement even
with Republicans fully controlling Congress, and some reports suggest
infrastructure won’t be a priority until at least the end of 2018. But if the
president prevails, experts agree his policies could give a lasting boost to
infrastructure assets. Many analysts say these investments already have been
doing fairly well in recent years despite heightened market volatility.
In the defined contribution (DC) space, infrastructure
typically comes into the picture as part of asset allocation solutions
including alternative assets or “real” assets. These include commodities,
natural resource equities and listed real estate securities, among others.
While these asset types tend to be somewhat illiquid, they can increasingly be
accessed in a more liquid way by retirement investors through prepacked
These assets historically have performed well when stocks and
bonds have underperformed, according to a recent report by asset manager Cohen
and Steers. This is attractive to investors because of widespread projections
returns for stocks and bonds in the coming years.
The same report indicates that between May 1991 and December
2016, a diversified real assets blend portfolio with equally weighted portions
dedicated to global real estate, commodities, natural resources and listed
infrastructure, would have generated a 6.9% average annualized return. The
annualized total return for a typical 60/40 equity/fixed-income portfolio was
The stronger returns may be attributed to a real asset mix’s
potential to offset underperforming factors. Despite strong returns for real
assets between 1991 and 2016, the firm notes that commodities experienced a
bear market from 2008 to early 2016, and that this asset class has historically
been sensitive to inflation—something that will likely increase in the event
that President Trump succeeds in launching an aggressive infrastructure
spending plan and other pro-growth policies.
NEXT: Forming an infrastructure investing plan