CBRE Global Investors, combined with CBRE Clarion Securities and CBRE Caledon, is one of the world’s leading real asset investment managers providing real estate and infrastructure investment solutions to over 500 clients worldwide.
CBRE Global Investors is the investment management division of CBRE Group, Inc. the world’s premier commercial real estate services and investment firm. The company’s shares trade on the New York Stock Exchange under the symbol “CBRE.”
As we enter 2019, the issues that sparked market volatility last year remain unresolved, including: a government shutdown, a global trade standoff, growth slowdown fears, and other late-cycle investment risks. We believe investors should continue to seek shelter and recommend Global Listed Infrastructure as a prudent way to add defense and portfolio downside protection.
Volatility is back in the stock market. The S&P 500 posted its worst December in 87 years and the “FANG” stocks are down 20%+ from peaks. Virtually, all major asset classes were negative in 2018. While there may have been no place to completely escape the carnage, Global Listed Infrastructure outperformed other real asset securities and equities by a wide margin during the sell-off, providing downside protection. Risks and volatility remain elevated in 2019, and infrastructure deserves a starting spot on your portfolio’s defense.
In the chart, we highlight performance of Global Listed Infrastructure versus other listed real assets and listed equity alternatives. During the Q4 2018 equity market slide, infrastructure’s defensive characteristics helped deliver outperformance of more than 1,000 basis points and provided downside protection relative to other equities and related real assets such as Natural Resources and MLPs.
Source: CBRE Clarion, Bloomberg, Morningstar Direct as of December 31, 2018. Correction period is from the S&P 500 52wk high (September 21, 2018) to market inflection point and recovery (December 31, 2018).
The infrastructure asset class has a long track-record of downside protection and outperformance in tumultuous market environments. Over the past 20-years, Global Listed Infrastructure has captured only 62% of the global equity market downside. Also, adding infrastructure is not admitting defeat or betting on a recession. Infrastructure leaves the potential for upside capture intact if the market risks subside, as evidenced by upside capture versus global equities of more than 80% over the long-term.
Source: CBRE Clarion as of December 31, 2018.
Listed infrastructure does not only provide downside protection, it may capture a majority of the upside as well.
Infrastructure is a defensive asset class because of the characteristics of the underlying assets owned by Global Listed Infrastructure companies. Those assets tend to share common characteristics.
Inelastic demand due to the essential nature of the assets we use in everyday life
High barriers to entry due to the critical and often irreplaceable nature of the assets
Contracted revenue streams that in many cases offer inflation protection
Due to the above characteristics, earnings and dividend growth of infrastructure companies tend to be steady and predictable, making them particularly attractive at times of market uncertainty. The macro environment may remain challenging for investors and we believe the characteristics of Global Listed Infrastructure is well-positioned for continued outperformance in 2019.