October 27, 2014

Infrastructure Revival Could Provide Investment Opportunities in Construction and Related Industries, according to The Boston Company Asset Management

BNY Mellon Investment Boutique Says Current Underinvestment Trend Is Unsustainable

NEW YORK and LONDON, Oct. 27, 2014 /PRNewswire/ -- Engineering and construction are likely to be attractive areas for investors as a revival in infrastructure spending accelerates over the next decade, according to a white paper from The Boston Company Asset Management (TBCAM), the Boston-based equity investor for BNY Mellon. 

The report, A Blueprint for Investing in Infrastructure Themes, notes decaying bridges and roads are a common theme throughout the U.S. and other developed economies.  In Germany, for example, a recent government study concluded that $9.7 billion needs to be spent annually to maintain the current infrastructure, according to the report.

In the U.S. well-publicized events such as the 2003 blackout in the Northeast and the 2010 natural gas explosion in San Bruno, CA, served as reminders of the neglected infrastructure, the report said.

While governments in both developed and developing economies appear hard pressed to finance these projects, TBCAM said it believes the current levels of underinvestment are not sustainable over the long term and that innovative methods will be found to raise the necessary money.

Public-private partnerships have been gaining ground as a way to finance infrastructure, the report said. In this arrangement, a private enterprise designs, builds, assists with financing, and operates the project for a specified time.  This can provide a return on capital to the private enterprise, while the public benefits from the creation of new or upgraded infrastructure, TBCAM said.

"While public-private partnerships have been common in Europe for some time, they appear to be gaining greater acceptance in the U.S.," said James A. Lydotes, a co-author of the white paper and a TBCAM portfolio manager.  "The U.S. represents a secular growth opportunity."

It is becoming increasingly common for engineering and construction companies, which are contracted to design and build infrastructure projects such as toll roads, to participate in project financing by providing some equity, the report said.  TBCAM also noted that investors can own shares of companies that operate and maintain infrastructure projects such as toll roads after they are built.

While TBCAM said it is bullish on construction materials in general, the report said that the shale boom is generating a significant amount of proposal activity in petrochemical, liquefied natural gas and oil and gas projects in the U.S.

"We expect that these will be concentrated along the gulf coast due to the location of carbon resources, the presence of existing infrastructure and the pool of knowledgeable workers," said Lydotes.

In emerging markets, investments are required in a wide range of infrastructure projects, including electricity generation in India and clean water in South Africa.

Lydotes said, "Several emerging market countries have recently elected leaders whose campaigns included pledges of reform and infrastructure improvements."

The Boston Company Asset Management, LLC, a BNY Mellon Investment Management boutique, provides active equity investment-management services for corporate, public, mutual funds and union sponsored and jointly trusteed retirement plans, endowments and foundations.  Assets are managed by The Boston Company as well as its personnel acting as dual officers of either The Dreyfus Corporation or The Bank of New York Mellon.

BNY Mellon Investment Management is one of the world's leading investment management organizations and one of the top U.S. wealth managers, with $1.6 trillion in assets under management. It encompasses BNY Mellon's affiliated investment management firms, wealth management services and global distribution companies. More information can be found at www.bnymellon.com.

BNY Mellon is a global investments company dedicated to helping its clients manage and service their financial assets throughout the investment lifecycle. Whether providing financial services for institutions, corporations or individual investors, BNY Mellon delivers informed investment management and investment services in 35 countries and more than 100 markets. As of Sept. 30, 2014, BNY Mellon had $28.3 trillion in assets under custody and/or administration, and $1.6 trillion in assets under management. BNY Mellon can act as a single point of contact for clients looking to create, trade, hold, manage, service, distribute or restructure investments. BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation (NYSE: BK). Additional information is available on www.bnymellon.com, or follow us on Twitter @BNYMellon.

All information source BNY Mellon as of September 30, 2014. This press release is qualified for issuance in the UK, Europe and US and is for information purposes only. It does not constitute an offer or solicitation of securities or investment services or an endorsement thereof in any jurisdiction or in any circumstance in which such offer or solicitation is unlawful or not authorized. Any views and opinions contained in this document are those of the investment manager, unless otherwise noted. This press release is issued by BNY Mellon Investment Management (US) and BNY Mellon Investment Management EMEA Limited (BNYMIM EMEA) to members of the financial press and media and the information contained herein should not be construed as investment advice.  Past performance is not a guide to future performance.  The value of investments and the income from them is not guaranteed and can fall as well as rise due to stock market and currency movements.  When you sell your investment you may get back less than you originally invested. CFA® and Chartered Financial Analyst® are registered trademarks owned by CFA Institute. Registered office of BNYMIM EMEA: BNY Mellon Centre, 160 Queen Victoria Street, London, EC4V 4LA. Registered in England no. 1118580. Authorized and regulated by the Financial Conduct Authority. A BNY Mellon Company.


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Joanna Pope

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