How to find equity-like returns with lower risk for your portfolio

Please note: This interview was recorded on 11 March 2025

Fund profile

• Name of the fund and ASX ticker: Resolution Capital Global Listed Infrastructure Fund – Active ETF (ASX: RIIF)
• Asset Class: Global listed infrastructure
• Investment objective: The Fund aims to achieve an annual total return that exceeds the total return of the FTSE Developed Core Infrastructure 50/50 Index (AUD) Net TRI after fees on a rolling 3-year basis
• Fund Page:

The global equity market certainly delivers the goods over time, but you have to ride out a fair bit of volatility to get there. It’s something investors might be feeling the particular pain of in today’s highly uncertain markets. But what if there was a way to generate equity-like returns with a lower level of risk?

Sarah Lau, portfolio manager for the recently listed Resolution Capital Listed Infrastructure Fund – Active ETF (ASX: RIIF), believes global listed infrastructure is the answer.

“Historically, it’s generated equity-like returns with a risk profile somewhere between bonds and equities,” she says.

To put that in context, the FTSE Developed Core Infrastructure 50/50 Index (AUD) Net TRI returned 22.60% in the last year with a Sharpe ratio (a measure of returns for risk) of 2.1 (to 28 February). The S&P 500 has returned 23.49% in the last year, with a Sharpe ratio of 1.13.

Bearing in mind these are quite high returns for risk, if you take a slightly longer view, the 3-year Sharpe ratio for the infrastructure index is 0.7, while for the S&P 500, it is 0.44.

Lau cautions that investors need to be selective about what they look for in the listed infrastructure space.

“We’re looking for quality assets. We’re really looking for optionality upside that is underappreciated by the market. 

We’re also looking for strong balance sheets, and we’re looking for strong management teams with skin in the game,” says Lau.

She specifically notes that she likes infrastructure assets to have the following two criteria:

1. Be critical to the economy - this means a resilient cashflow stream for investors
2. A monopoly, or having high barriers to entry - which creates pricing power

The opportunities to watch in global listed infrastructure

In the current environment, there are two significant thematics that Lau is monitoring for the portfolio.

The first is electricity demand growth and the energy transition, with Lau highlighting that AI is still nascent and energy-hungry, plus there is still a super-cycle of investment needed for the energy transition.

“We feel very comfortable with electric utilities, which are monopolies, and they generate a reasonable return on the investments that are needed. These investments are accretive to shareholders,” Lau says.

The second theme Lau likes is mobility, covering urbanisation and the movement of goods, services and people.

Airports and toll roads can continue to benefit from this theme, and “as the utilisation of these assets continues to increase, we think the returns on these assets will improve.”

Using listed infrastructure in a portfolio

“Listed infrastructure, along with property, fall into the Alternatives bucket, which provides a good inflation hedge and diversification for investors. Typically, this is included in portfolios at roughly 5%," says Lau.

She notes that global listed infrastructure offers defensive growth in portfolios and is currently seeing yields around 3.5% (and growing).

For more about the Resolution Capital Listed Infrastructure Fund – Active ETF (ASX: RIIF) and the opportunities that Lau is investing in, watch the Fund in Focus above.

Time codes:

0:00 - Introduction
0:30 - The philosophy behind RIIF and approach to infrastructure
1:39 - Qualities and criteria for selection
2:20 - The decision to create an active ETF
3:00 - The best opportunities across the sector
4:30 - How the strategy works in a portfolio
5:30 - Managing risks in the strategy