Infrastructure

Let's start with a level set. Infrastructure  has evolved enormously over the past decade.   What kinds of assets are you investing in today? Well, Zach, we all use infrastructure in our  daily lives and have an intuitive feel for   things like airports and toll roads and bridges,  but infrastructure today is so much more than   that. At Russell Investments, we invest in what  we call "essential infrastructure" - the types of   facilities and services which are indispensable  to our modern lives, but often unnoticed or even   entirely unseen, such as our drinking water  and our electricity. But what is essential   in an economy changes over time. Think about the  digital sector, where we can agree that something   like high bandwidth fiber internet is essential  in homes and businesses today, but that may not   have been true only a few short years ago. We're  in a world that's changing so quickly. Think about   another problem like energy security. Right now,  we're putting capital to work in renewable energy   generation, and in solutions to create liquefied  natural gas to move energy around the world. Okay Michael, these are all complex  investments. They require lots of capital,   they're illiquid, and they can take  decades sometimes to return that capital.   So my question, really, is whether this  asset class is just appropriate for   big institutions or does infrastructure  make sense for retail investors as well? Zach, the big institutional investors were  certainly the pioneers in this asset class.   They realized that it generates stable performance  and works well as part of a diversified portfolio   because of its low correlation to other assets  like stocks and bonds. But it's more accessible   now to a much wider set of investors. Today's  infrastructure investments often have more   liquidity, more tax options, smaller minimum  commitments. It can be difficult to build   a diversified portfolio in this space though.  We prefer to hold around 100 assets to achieve   diversification by country, sector, and regulator,  but we find that a lot of individual fund   portfolios have far fewer assets, and work better  when they're combined in a multi-manager format.