J.P. Morgan Asset Management Says Opportunity In Core Infrastructure Is Too Good To Last

-- New research piece describes impact of increased demand on asset class --

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May 02, 2013, 09:00 ET

NEW YORK, May 2, 2013 /PRNewswire/ -- J.P. Morgan Asset Management asserts in a new research piece titled "Too Good to Last" that while investors are primarily drawn to infrastructure for its income and lower volatility, early movers are also likely to enjoy outsized capital appreciation over the near to mid-term as the demand for infrastructure assets grows.

In this new report, Mark Weisdorf, portfolio manager, J.P. Morgan Asset Management OECD Infrastructure Equity, predicts that the early mover window will close over the course of the next few years, with discount rates compressing by 100 basis points or more. He explains:

Core infrastructure currently offers a return that appears more than commensurate with its relatively low risk profile, suggesting the returns may moderate as risk-return perceptions evolve.
Demand from institutional investors is likely to increase since U.S. pension plans, more recent movers into the asset class, currently have average allocations of less than 1%, while many institutional investors outside the United States are below their larger target infrastructure allocations.
The increase in supply of mature, "institutional-quality" core infrastructure assets is likely to lag the increase in demand, suggesting a near-term increase in the value of assets, compressing discount rates and future rates of return.

"We believe we are rapidly approaching a tipping point where institutional investors who are searching for income, frustrated by lackluster economic growth and dissatisfied with the volatility of public equity markets, will turn to infrastructure in larger numbers and with greater allocations," said Weisdorf. "This move could result in discount rate compression, pushing asset values steadily higher. We expect this to happen over the next two to three years, to the benefit of incumbent infrastructure investors."

To read more about J.P. Morgan's view on this investment opportunity, please visit jpmorganinstitutional.com.

About J.P. Morgan Asset Management
J.P. Morgan Asset Management, with assets under supervision of approximately $1.9 trillion and assets under management of $1.5 trillion (as of 3/31/13), is a global leader in investment management. J.P. Morgan Asset Management's clients include institutions, retail investors and high-net worth individuals in every major market throughout the world. J.P. Morgan Asset Management offers global investment management in equities, fixed income, real estate, hedge funds, private equity and liquidity. JPMorgan Chase & Co. (NYSE: JPM), the parent company of J.P. Morgan Asset Management, is a leading global asset management firm with assets of approximately $2.1 trillion and operations in more than 60 countries. Information about JPMorgan Chase & Co. is available at www.jpmorganchase.com.

J.P. Morgan Asset Management is the marketing name for the asset management businesses of JPMorgan Chase & Co. Those businesses include, but are not limited to, J.P. Morgan Investment Management Inc., Security Capital Research & Management Incorporated, Junius Real Estate Partners and J.P. Morgan Alternative Asset Management, Inc.

SOURCE J.P. Morgan Asset Management