UK infrastructure funds are being seen as a key focus of investors and fund managers as explained here by Natasha Levanti, ACE Group Communications Executive
While UK businesses involved in building saw an initial downturn after the EU referendum, after the lowering of the interest rate, UK infrastructure funds and building stocks are now a key focus of investors and fund managers.
This attention is, at least for now, creating a stimulus boost for UK infrastructure funds and stocks within the building sector.
Around the world and in the UK, monetary policy (regulatory actions to determine the size and growth rate of the money supply) is the chief form utilised to stabilise the marketplace, as seen through the lowering of the interest rate.
Theresa May’s speech likely spurred investor’s interest in infrastructure and industry funds. Shortly after becoming prime minister, her speech contained a promise of Treasury-backed bonds for new infrastructure projects within her new industrial strategy. As an apparent change from six years of cuts in spending, this flagged to investors that May could be open to infrastructure as an option for breathing life back into a faltering economy.
As the economy fluctuated after the referendum, UK finance minister Philip Hammond stated that he would pursue any needed steps to support the UK economy, signalling to investors that with economic uncertainties prevalent, the government may find itself in the situation whereby it is willing to borrow in order to stimulate the economy.
If that wasn’t enough to change the priorities of investment managers, to counteract economic downturn Mark Carney, Bank of England governor, lowered the interest rate while at the same time ruling out negative rates being enacted in the future, signifying a limitation to the monetary policy alterations the UK is willing to undertake.
All these indicators have spurred investment managers to actions which are, for the time being, boosting the value of UK infrastructure funds as well as stock within the building and construction sector.
If one follows the investment trail, this investor preference shift can be seen in two main investment moves: increased investments in infrastructure funds focused on community essential like roads, bridges, hospitals or schools, and through the investor purchasing of companies that would be on the receiving end of a government investment in building.
To see this more clearly from an investor’s perspective, compare infrastructure trusts with property investment trusts. After the Bank of England cut interest rates in early August, infrastructure trusts have risen in value, while property investment trusts have continued to decline. Additional to this is the observation that those infrastructure trusts directly dealing in government-backed assets are trading at a record post-referendum premium to net asset ratio.
It is clear that investment managers are weighing out the potential moves by the UK government to further stabilise the economy. This includes shifting investments from property for which a continued decline is anticipated to infrastructure trusts, which presents itself as a viable option as the BoE reaches the end of monetary policy and the government wishes to enact the new prime minister’s industrial plans.
This shift in investor preferences can also be seen in the recent positive investment movement to the stock of those companies who are seen to be directly involved in construction, and would, therefore, benefit from any increased activities in the sector.
While our industry is keen to see government commitment to infrastructure projects, investment indicators continue to reveal that infrastructure may be seen across disciplines as the way forward in order for the government to stabilise the economy.
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Natasha Levanti
Group Communications Executive
Association for Consultancy and Engineering (ACE)
Tel: 020 7222 6557
consult@acenet.co.uk
www.acenet.co.uk
Twitter @ACE_Updates
