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IDEAS AND KNOWLEDGE TO INSPIRE YOUR INVESTMENTS THINKING
17 January 2019

What does US shutdown mean for infrastructure?

The impact to the listed infrastructure space around the government shutdown is fairly limited. In the US, we have a very decentralised set of infrastructure regulations, mostly administered at the state level. Regulated utilities, as an example, are all subject to regulations, but these are typically set at the individual state level, and state level regulators are not impacted. There are some exceptions to this, as interstate gas and electricity transmission is governed by a federal regulator but again, most of this is administered at the state level. As there are no listed private airports available in which to invest, there is similarly no impact there, as I know there has been much written on air traffic controllers and TSA security agents being affected. (Were there private airports in the states, as we see in much of the world, there would be an impact, but given these are not privatised, there is no impact to the investable US infrastructure stocks).

 

Although highway and construction projects are reliant on some form of federal funding (which are nearly all of these) and will likely be impacted by the shutdown, even a “short” one, there are no listed infrastructure equities associated with these projects.

 

Were this shutdown to continue for a long period of time (measured in months) then I think there would start to see a greater influence on listed infrastructure assets. For example, cross state border gas and utility projects could be delayed if these offices are shutdown. Given the very long-dated nature of these projects, over the near term I wouldn’t expect to see the effect but would reassess should this stretch out much further.

 

Jim Lydotes, global infrastructure manager, Mellon

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Investment Managers are appointed by BNY Mellon Investment Management EMEA Limited (BNYMIM EMEA) or affiliated fund operating companies to undertake portfolio management activities in relation to contracts for products and services entered into by clients with BNYMIM EMEA or the BNY Mellon funds.

 

Mellon was formed on 31 January 2018, through the merger of The Boston Company and Standish into Mellon Capital. Effective 2 January 2019, the combined firm was renamed Mellon Investments Corporation.

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