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Segal Advisors Hot TopicsInfrastructure Investing Gets More Attention Infrastructure has become a hot topic in the U.S. as bridges, roads and schools decay and investors seek to diversify their portfolios in volatile markets, reports Glenn Ezard, senior consultant in the Los Angeles office of Segal Advisors. He points out that infrastructure includes a variety of subsectors including bridges, toll roads, electricity and gas distribution and transmission, power generation, hospitals, schools and prisons. “With infrastructure investment recently at 2% to 2.5% of U.S. gross domestic product, an increase to 3% in 2009 would mean $459 billion for infrastructure construction and improvement, and an increase to 5% of GDP would equal $764 billion,” Ezard says. He points to these positive characteristics of infrastructure investment:
This last characteristic is especially important in volatile markets. For example, between July 1997 and December 2006, the UBS Infrastructure & Utilities Benchmark Index had a correlation of only 0.49 with the S&P 500. Infrastructure Investing also has its risks:
Mr. Ezard sees a number of investment vehicles gaining ground as infrastructure gets more attention. Among U.S. institutional investors, the general preference has been for closed-end limited partnerships. The primary alternative for institutional investors is open-ended funds. Each of these has advantages and disadvantages. More appropriate for individual investors are retail vehicles including listed funds, ETFs, and master limited partnerships. Review of Second Quarter 2008 Financial Market Conditions Each issue of this publication, Synopsis, covers key economic indicators, investment performance (selected rates of return, long-term equity trends and selected fixed-income data) and noteworthy developments. The following are highlighted as key topical areas that were of focus during the second quarter:
Click to read this issue of Synopsis. Quarterly Review of Economic, Financial Market Conditions Segal Advisors has just published its first quarterly review of economic and financial market conditions. Each issue of its quarterly newsletter, Synopsis, includes the following sections:
Read the first issue of Synopsis here Segal Advisors Finds Slippage in 401(k) Plans (2/28/08) – As part of its assessment of 401(k) defined contribution (DC) savings plans, Segal Advisors has found a number of areas where slippage occurs. “Plan sponsors may have set up good, well-administered 401(k) plans years ago, but legislation, regulations and the investment environment change, and significant slippage can occur,” observes Robert Liberto, senior vice president at Segal Advisors. For example, he reports that gap analysis of a DC plan’s investment options for employees sometimes finds that certain important fund styles such as life-cycle funds are missing, or what was once a small-cap fund several years ago is now a mid-cap fund because of share price appreciation. According to Gino Reina, director of research at Segal Advisors, plan sponsors should also consider renegotiating the share class that is offered to employees in certain funds so they get the best-priced shares available such as institutional shares. Reina says that DC-plan assessments may find that greater fee disclosure and cost transparency from the fund administrator are needed. “In some cases, however, higher fees are warranted by the type and success of a particular fund, and small plans may have to pay more in fees than large-asset plans,” he remarks. Another area where slippage occurs is in a 401(k) plan’s investment policy guidelines. These cover such matters as the process for fund review, addition or replacement, and investment benchmarks for fund performance and the role of fund managers, administrators and other professionals |
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