Infrastructure Debt: A Solid, Sustainable Fixed Income Solution
Fixed income investors looking to hedge long-term liabilities with high-quality assets are presented with limited choices to build out a diversified solution that also offers attractive returns. Infrastructure-related debt is one segment that can deliver on this need.
A well-constructed Infrastructure debt portfolio that is secured by high-quality assets could:
- Demonstrate a risk/return profile that complements and diversifies traditional credit investments.
- Hedge long-term liabilities.
- Be aligned with ESG and sustainable investing principles.
Infrastructure Debt Attributes Fiera Capital’s Infrastructure Debt Strategy offers a unique opportunity to invest in high-quality, stable fixed income securities secured by real assets. These securities provide superior risk-adjusted returns and diversification away from traditional corporate bond investments.
Infrastructure debt encompasses a range of segments, including but not limited to: social infrastructure (hospitals, schools); transportation infrastructure (availability-based highways, toll roads, container terminals, transit, bridges); renewable power (wind, solar, hydro); airports; and regulated utilities. These debt instruments are often not included in major indices and provide an opportunity to diversify holdings away from traditional corporate bonds.
Many Infrastructure projects fall under the Public-Private Partnership (PPP or P3) structure that typically provides strong contractual protections along with stable and long-term cash flows originating from highly rated government counterparties. Investments in renewable power exhibit similar characteristics primarily due to long-term Power Purchase Agreements (PPA) with provincial government counterparties offering protection from market pricing volatility.
Given the nuances of project financing, infrastructure lending requires a specialized approach to due diligence than a typical corporate bond.
Our deep expertise in infrastructure investments combined with rigorous due diligence and hands-on engagement helps us add value through security selection with an emphasis on project characteristics, structure, and performance monitoring. Further, our strategy offers the flexibility to optimize the portfolio through a mix of public and private infrastructure debt investments.