News & insights

Q&A with Portfolio Manager, Tyler Rosenlicht

In this short video interview, Tyler Rosenlicht from Argo Infrastructure’s specialist, New York-based Portfolio Manager, Cohen & Steers, answers various topical questions about global listed infrastructure.

Recorded during Tyler’s recent trip to Australia for Argo Infrastructure’s information meetings in various cities.

Watch the video here and read the transcript below.


What do higher interest rates mean for global listed infrastructure?

Well, I think it’s important to separate short-term from long-term. In the short run, there’s lots of businesses that do poorly when interest rates are higher because that can weigh on valuations.

But for us, you have to put higher interest rates in context and say, well, why are rates high? You know, we think if rates stay high, it’s going to be because global economic growth remains robust and inflation is fairly high, and infrastructure businesses tend to do well when those two things are happening. I mean, these are the assets that power the global economy.

So, strong growth tends to be really good for cash flows and most infrastructure businesses have the ability to pass high inflation on to their customers, which makes them very resilient. So in a high rate world that’s high because of inflation and strong growth, we actually think infrastructure is poised to do very well.


What would a Trump Presidency mean for infrastructure?

So we’re recording this here in May and what I’d start with is November is a really long time away, but it’s important to think about the variability of what can happen if Trump is elected or Biden is re-elected.

You know, for us, when we think about the future, we think there’s a couple things that can change. The first would be views on global energy policies. Clearly, Biden has been more supportive of transition and renewables. A Trump presidency would probably lead to more confidence in the long-term viability of things like oil and natural gas.

We also think a big difference will be tax policy. You know, President Trump and Biden both like to spend, and we think they’d still be strong stimulus from both parties, one though, would likely increase corporate taxes and maybe personal taxes. The other maybe fuels more of their spending with debt.

So a long way, away, I would note, you know, though, these tend to be things that create a lot of concern. The US government has a long track record of administration turnovers, and it tends to, in hindsight, never be as big of an issue as it is when you look forward.


Can investors get exposure to the AI boom through Infrastructure?

I’d say we’re very big indirect beneficiaries of artificial intelligence and the reason is, again, these are the assets that power the global economy. They provide all of the assets to make sure power gets to where it needs to be, data centres are running and so forth.

You know, when you think about energy demands from data centres and artificial intelligence, it’s massive. In the US, we have not seen electricity consumption grow in almost 20 years and now we’re talking about growth in electricity demand driven by a lot of these things.

So for us, though, you’re not going to see the exposure to technology companies, you will absolutely see the indirect benefits from things like rising power demand, need to invest in telecommunications networks, need to build more data centres, the need to build more transmission wires, and so forth. Big drivers of things like renewable capacity additions. You know, honestly, it might lead to more natural gas demand. So it’s a great way to play a secular theme without as much technology risk.


What are the key themes for the asset class currently?

There’s lots of themes that we’re focused on, but I’d highlight three here.

You know the first is this digital transformation. You know people have been consuming more data for a long time, but that’s accelerating with artificial intelligence and so infrastructure sectors can be the backbone of this digital transformation and we think that’s really starting to inflect stronger.

I’d also say another theme that we’re very excited about is not the energy transition, but actually what we’re calling the energy addition. We think there’s a massive change going on in global energy, which is going to require huge investments in renewables as we repower and redesign the global grid, but we also think traditional forms of energy are going to be relied upon for a really long time.

So there’s this huge need to build energy and build the infrastructure required to make sure it’s moved to where it needs to be consumed and so this energy addition is another big theme.

The last one that I would focus on is deglobalisation and what that will do to global supply chains. You know, we think there was a multi-decade trend of a ‘just in time’ global inventory system where it was easy to be reliant on one or two trade partners.

In a post-COVID and sort of post-geopolitical crises world, we think that’s no longer the case and infrastructure companies that own things like port systems, own things like railway networks, we think are going to see lots of opportunities as the global supply chain gets redesigned.


What subsectors, geographies or stocks do you favour currently?

Couple of sectors that we’re particularly excited about would be certain US electric utilities. Again, we haven’t seen electricity demand grow in almost 20 years in the US – utilities with good balance sheets in good regulatory regions with an ability to build renewables and help power this demand growth we think are really well positioned.

We continue to like traditional midstream energy assets – the gas pipeline networks that help make sure gas supply is meeting domestic consumption as well as starting to meet global demand needs from China and other places.

And then lastly, I would say we really like the environmental services sector. This is waste management businesses that may not be traditionally viewed as infrastructure, but they absolutely have infrastructure characteristics. They have more predictable volumes than things like freight rails, and we think a huge opportunity for consolidation should help to improve their margins over time.

So lots of great opportunities globally and those are just a couple of the sub sectors that we’re excited.


What’s your outlook for the asset class?

Our outlook for infrastructure as an asset class is really positive. You know, when we look at valuations of infrastructure today, they’re actually very low, particularly when you compare them to global equities. So we think lots of good secular opportunities are being not rewarded by markets.

Again in a higher inflation world, maybe higher volatility, some concerns around global equity valuations, exposure to downside-protected asset classes that are more predictable like infrastructure, we think will become more favorable. So when we think about secular trends, we think about valuations, we think about the macro, we do continue to believe this is an asset class that investors really will be happy with in the future.