- Trump win should support infrastructure and enhance prospects for more primary issuance (new listings and raisings by existing listed companies)
- Infrastructure globally needs investment of $50trn over next few decades
- Renewable energy still an attractive part of the infrastructure universe despite Trump’s rhetoric
London, United Kingdom, 19 January 2017 – US President-elect Donald Trump’s pledge to spend $1trn on infrastructure is likely to spark a rise in primary issuance across the sector, with the proposed capital spend fostering a favourable investment environment for the asset class, according to Legg Mason affiliate RARE Infrastructure.
While statements have lacked detail thus far, RARE’s co-CEO and CIO Nick Langley says Trump’s initial comments about the scale of the investment have created a solid backdrop for investment in infrastructure assets, while also boosting confidence in the sector.
“Broadly, the Trump agenda is good for confidence and good for the listed market that has ready access to capital,” he says. “Investors will be looking for new and interesting things to invest in and that is a positive for the sector.
“However, we are not anticipating a sudden flood of issuance as soon as Trump takes office because projects need to be identified, prioritised, planned and approved before they can be funded,” Langley says.
Trump’s talk around the sector is nonetheless laying the ground work for more projects to be floated in future, especially as the total investment required is so substantial.
“A spend of some $50trn globally is required over the next couple of decades and the US is a large percentage of that,” Langley says.
“We’ve been expecting the US to invest a lot more into its infrastructure for the last decade, and there has been a lot of chatter in the market about the size of the infrastructure plan and how it will be funded. But as these policies develop, it becomes more about how the government creates an environment to enable investment in infrastructure, without spending too much public money.”
Raising equity in the public market would be the most obvious answer to meet the required investment given the size of the listed market compared to the private market, and Langley says it is a matter of when, and not if, the primary issuance come through.
“Over time, as the need for capital to fund investment into the underlying assets comes through, we would expect to see the listed market get tapped,” Langley says. “The listed market is four times larger than the private market, so we see a lot of call on the equity market over time.”
As for what kind of infrastructure projects will materialise, there have been concerns raised that alternative energy could suffer in the US given Trump’s comments on the sector, and his support of fossil fuels.
However Langley expects the rhetoric at the Federal level to have little impact on the States which are the key decision makers, with renewables continuing to be a focus for the country.
“The agenda and spend on renewables is going to continue largely unabated, despite Trump being a fan of fossil fuels,” he says. “In addition there is a significant programme required to replace aging electricity and water infrastructure in the US and continue the development of gas infrastructure to support the expected increase in industrial production.”