Why pension schemes should consider investing in infrastructure

Amid increasingly difficult economic conditions and volatile markets, pension funds, globally and locally, are grappling with diminishing and volatile returns from traditional asset classes, which include treasury bonds and bills, equities, corporate bonds and bank deposits. While they have previously proved sufficient from the return and risk management perspective, recent years have proven that their returns have become less attractive and more positively correlated, resulting in lower returns for pension schemes while losing their diversification elements.

To enhance and protect portfolio returns from such volatility, it is imperative that pension funds begin to look towards alternative investments such as private equity, property and infrastructure.While most local pension schemes are quite familiar with private equity and property investments, infrastructure too, is an emerging asset class which promises huge potential benefits for pension funds with regard to return enhancement and portfolio risk mitigation.