Infrastructure market outlook 2024

The global economy proved stronger than expected in 2023, despite major geopolitical uncertainties around the world. The turnaround in inflation expectations at the end of the year led to a rapid decline in long-term interest rates and a strong rise in the equity markets. The prices of low-cyclical and high-dividend infrastructure equities also rose towards the end of the year and full-year returns for UB Infra Fund (UCITS) approached their long-term average.

In the infrastructure sector, the best performers were companies specialised in oil and gas distribution, and airport services companies, which had recovered from the effects of the pandemic. By contrast, traditional utilities, such as electricity, gas and water companies, were the worst performers. They typically have the highest dividend yields, so the high level of interest rates in 2023 weakened their relative position as investments.

In emerging markets, returns were modest, largely due to China’s much weaker-than-expected economic performance. The UB Emerging Markets Infra Fund only barely climbed into positive territory thanks to a year-end rebound. 

Infrastructure companies’ strong and stable stream of dividends is a key factor in their value formation, so large interest rate movements play a role in their valuation in the equity market. Last year’s reversal of the interest rate cycle will be a very positive factor for these companies this year, even if the economic cycle starts to show signs of weakening.

Among the infrastructure sectors, water, gas and electricity companies, which are the least cyclical and offer good dividend yields, can be expected to perform best. Travel and transport logistics companies are not expected to match this development.

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Infrastructure investments have the advantage of a good potential for profit and stable development.

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The information presented is based on UB’s own estimates and sources considered reliable by UB. The information on which the conclusions are based may change quickly and UB Group may revise its market view without prior notice. No information obtained through this presentation should be construed as a solicitation to invest. When making investment decisions, readers should base their decisions on their own assessment of the investment and the risks involved, and to consider their personal goals and financial situation.

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