In addition, the sector is set to enjoy support from the political sphere for the foreseeable future and can look forward to sustained growth. Just like anything else on the exchanges, however, investments in infrastructure equities are not a sure thing. The opportunities also involve risks, and good equity-picking and constant monitoring of the market are essential. And this is where Raiffeisen-NewInfrastructure-ESG-Aktien comes in.

The future is being traded on the equity exchanges

This applies not only to corporate earnings and potential dividends, but also to the major themes and investment trends on the markets. Therefore, Raiffeisen KAG has defined a range of Future Transformation Topics, or future topics, that will likely shape the decades to come. They are regularly discussed in working groups by fund managers and analysts with expertise in a wide range of themes (e.g. health care, infrastructure, and technology), regions (Europe, Asia, Emerging Markets), and asset classes (bonds, equities, commodities). This allows many different and valuable perspectives to be incorporated and thus provides an excellent basis for equity-picking and market assessments.

At present, themes such as

• mobility

• digitalisation

• the energy transition

• demographic change

• urbanisation

play an important role for Raiffeisen-NewInfrastructure-ESG-Aktien.

Rather unsurprisingly, the fund management focuses on the companies that have the potential to profit from the various government infrastructure packages to an especially high degree. The emphasis here is on the quality of the companies, their fundamental valuation, and their expected value enhancement potential. The fund portfolio currently includes both very trusted companies such as Oracle, Apple, Verizon, STMicroelectronics, and Alstom as well as firms such as Bharti Airtel (India) that are largely unknown, at least in Austria.

Sustainability and infrastructure

Infrastructure is not only essential for our daily lives, it is also the key to a more healthy, sustainable, climate-friendly, and environmentally-sound world. Nevertheless, infrastructure and sustainability do not automatically make a perfect match. On the one hand, a great deal of the existing infrastructure is by no means “sustainable” – just think of motorways with petrol stations or oil pipelines, for example. On the other hand, for the time being the construction of more sustainable infrastructure is hardly possible without companies and sectors that are not exactly associated with sustainability, such as oil and coal suppliers or copper and iron ore mines. And even sustainable power generation is not as resource-efficient and environmentally friendly as one would wish when it comes to construction and disposal. In this regard, it is important to understand that sustainable economic activity is a process and not something that can be realised overnight.

Multifaceted ESG concept

Consequently, the ESG investment concept in Raiffeisen-NewInfrastructure-ESG-Aktien applies a mix of

• negative criteria (exclusion of certain sectors and companies, such as coal or companies that violate human and labour rights),

• minimum ESG ratings for companies in the fund,

• active engagement and communication with the invested companies.

This is supported by our long-standing expertise in sustainable investing and active dialogue with companies. The latter in particular can be understood as an active effort to improve the relationship of sustainability and investment.

Growth and continuity in a single fund

One advantage of the – multifaceted – infrastructure segment is that it contains both explosive growth and highly economy-driven equities as well as a high number of companies that are rather “boring” but in turn are hardly cyclical. For example, the construction and operation of infrastructure and the resulting revenues are generally less dependent on economic cycles, i.e. are less cyclical than in other sectors. This means that infrastructure equity funds often hold up better during periods of economic downturn compared to the broader equity market, and conversely they tend to generate below-average performance during periods of economic upswing. Consequently, they are well suited for the diversification of equity or mixed portfolios. Nevertheless, equities in the infrastructure sector can also be subject to significant price volatility at times.

First came the hype, then came the fall…

For example, infrastructure investments – particularly in the renewable energy segment – enjoyed a veritable boom a few years ago, with highly exaggerated expectations on the part of investors in some cases. The announcement of major infrastructure investments in the EU (Green New Deal) and the USA (Inflation Reduction Act) further fuelled this trend. In the meantime, the hype has evaporated and/or moved on to artificial intelligence and chip manufacturer equities. At the same time, the change in the interest rate environment had a very negative impact on the financing and earnings potential of many infrastructure projects, and excessive optimism was replaced by more realistic expectations. In the midst of all this, the equitie prices of many infrastructure companies have lagged behind other sectors or outright declined in some cases over the past 18 months, for example in the wind power and solar segments.

…and is a comeback on the horizon now?

In turn, valuations in the infrastructure sector are more favourable in relation to the overall equity market than they have been in years, and are also underpinned by a more robust fundamental basis. This forms a solid foundation for a comeback by this investment theme. Because the construction, expansion, and modernisation of infrastructure will remain a megatrend for the foreseeable future and a growth sector over the long term, beyond economic cycles and monetary policy. After all, this field is crucial for modern life and the future sustainability of communities and companies. What is more: The world we live in and the infrastructure needed to make it work are constantly changing and thus consistently offer new challenges and investment opportunities.

Raiffeisen-NewInfrastructure-ESG-Aktien exhibits elevated volatility, meaning that unit prices can move significantly higher or lower in short periods of time, and it is not possible to rule out loss of capital.