Firstly, it is important to thoroughly understand what consists of infrastructure development before deciding on why it is something we should consider investing in.
What is infrastructure development?
They include of the developmental procedures for assets such as railways, airports, shipping ports, wireless telecommunications facilities, gas distribution centers, water treatment facilities, to only name a few.
What entities are involved with infrastructure investing?
The process of infrastructure investing involved placing money into a single asset or multiple assets, and this can include of developments for building railways, communication towers, or water treatment plants for an example. The funds you provide is then channeled through investment funds or development companies.
In order for a company to be referred to as an infrastructure entity, it is required for them to be registered as a managed investment scheme, or a company that directly offers investments to investors on a retail basis as a focused service.
This allows them to receive the invested capital via quality controlled methods.
What are the benefits of infrastructure investments?
One of the primary benefits for these types of investments can not only include of providing a profitable return for the long term, but it can also providing a contribution to the economy and its’ overall growth with a large magnitude.
With increased investments provided by investors, more alleviation can be provided for the financial demands many infrastructure companies require to be successful in their projects.
By and large, the primary reason as to why these types of investments can help to boost economic growth, is because of its ability to directly influence the economy’s productive capacity in a positive manner. With increased levels of capital, these companies involved in the development of the infrastructure can invest it in new employees, research and development, or raw materials, which can then be turned into higher returns via the sale of products and/or services.
When it comes to the area of benefiting employment levels, infrastructure investing can have three different types of effects. Direct effects include of more jobs being created for the direct development of infrastructure. The second is indirect effects, which consist of the increased demand and requirement for more raw materials, I.E. fabrication jobs. Lastly, the third is an induced effect, which is a result of the increased employment rates itself where their income is spent on additional goods and services.
Infrastructure asset investments, closely related to what many investments mutual fund companies have to offer, is commonly referred to as a ‘defensive’ asset. It is normally an asset that consists of a low to very low risk with multiple risk levels in that range, and able to provide a steady return in the long term. The amount of the maturity depends on the economic cycle that is involved with the type of infrastructure itself, of course. Other factors that are effected by the type of infrastructure investment can include of its risk, taxation, and returns.
For example, here are some examples of various revenue models for various infrastructure types
Utilities - Waste Water treatment can offer a 10% expected return, with an 8-10% cash yield
Transportation – Airports can have a 15 to 18% return, with a 5 to 10% cash yield
Power and Energy – Power Generation facilities can provide an expected return of 12 to 20% return, with a cash yield of 7-10%
With the abundant variation in infrastructure types, it can offer a wide array of availabilities for investments with different characteristics that may be sought after. Also, they have unique, beneficial factors that can contribute to the overall quality of a town, region, or a country as a whole – all depending on the size of the infrastructure project itself. Hence, being able to not only provide prosperous returns not only to the society, but also for the investor as well.
Mark Long is a Leading financial expert helps his clients to plan and meet their financial demand. Mark also helped many sucessful Financial Investment plans that made him popular and successful today.