Pace of Inflation Returning to Normal is Unknown: Recent CPI prints have come in below market expectations and are off the high mark set in June, but the path returning to the Federal Reserve’s target of 2% will most likely be volatile and full of fits and starts. Investors still need inflation protection during this unknown timeframe and global infrastructure offers historical correlation to inflation.
Attractive Late Cycle Asset Class: Infrastructure assets have tended to do well in economic slowdowns due to their inelastic demand of essential services, high barriers to new entrants and predictable cash flow streams. These features make infrastructure an attractive asset class as investors prepare for the potential of a global recession in 2023.
Provides Stability as Equity Market Volatility Increases: The predictiveness of both expenses and revenues associated with established infrastructure assets has the potential to offer lower relative volatility compared to other risk assets. As global equity markets exhibit greater price swings due to inflationary pressures, economic data and monetary policy shifts, global infrastructure has potential to offer a level of downside hedge indeclining markets.
|Annualized Return During||Global Equities||Natural Resources||Global Infrastructure||Global Real Estate|
|Annualized Return During||Fixed Income||Global Equities||TIPS||Futures-based Commodities|
|% of Time Covers Inflation||0||63||33||89|
|Annualized Return During||Natural Resources||Global Infrastructure||Global Real Estate|
|% of Time Covers Inflation||59||67||67|
Source: Bloomberg. Data from 12/31/2012 - 12/31/2022. High Inflation (above 2.6%) is the 75th percentile of the data Normal inflation during this time frame has been below 2.6%. Past performance is not indicative or a guarantee of future results. Index performance retruns do not reflect any management fees, transaction costs, or expenses. It is not possible to invest directly in any index. Index performance is not representative of fund performance.
The Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. Indexes are available for the U.S. and various geographic areas. Average price data for select utility, automotive fuel, and food items are also available.
Global Equities are represented by the MSCI ACWI Index (USD). TIPS is represented by the Bloomberg US Treasury Inflation Notes TR Index Value Unhedged USD. Futures-based commodities are represented by the Bloomberg Commodity Index Total Return Index. Natural Resources is represented by the S&P Global Natural Resources Index. Global Infrastructure is represented by the S&P Global Infrastructure Index. Global Real Estate is represented by the MSCI World Index (USD.)
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