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Industry Insiders: Allocators should target US freight rail for defensive yield

North American freight rail offers Asian institutional investors USD-denominated, inflation-linked cash flows backed by critical domestic infrastructure, say Chris Sparrow and Ross Sylvester from Napier Park Global Capital.
Industry Insiders: Allocators should target US freight rail for defensive yield
Key Points
  • Asian institutional investors could consider Heavy Asset, Low Obsolescence (HALO) strategies like North American rail for durable yields.
  • Freight rail provides inflation-hedged, resilient cash flows protected from technological displacement and global trade disruptions.
  • The sector offers investment-grade stability for matching long-term liabilities, provided investors leverage specialised operational expertise.

Institutional investors across Asia are navigating a more challenging income environment as tighter spreads, elevated valuations and increased competition compress returns across traditional private market allocations. Private credit, core infrastructure and real estate remain central to portfolios for pensions, insurers, sovereign wealth funds and family offices, but sourcing durable income with attractive risk-adjusted returns has become increasingly difficult.

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