Introduction

Generating positive investment returns isn’t about skating to where the puck is, but where it will go next. Infrastructure investment is no exception.

One of the typical characteristics of an infrastructure investment is that it has high fixed costs. This is a powerful force for investors in periods of growth, but can be painful when demand shrinks.

We dedicate significant time to assessing the demand outlook for assets and seek to place our clients’ funds where sustainable cashflow is, whilst monitoring for rapid changes to the way we interact with the world. This means that infrastructure owners can be faced with structural (rather than cyclical) headwinds and the risk of stranded assets. This risk is compounded by rapidly changing personal attitudes towards climate responsibility – Swedish domestic air travel is an extreme example of how quickly volume outlooks can change.

In this report, we examine airports, currently one of the most sought-after categories of assets within infrastructure. Returns have been high, and the price of assets has risen persistently in the post-GFC era. Airports
are attractive assets because they have very solid demand outlooks, GDP-plus growth, some regulation, but also lots of levers that management can pull to enhance returns for investors – the latter is not typically available in classical core infrastructure investments.