Infrastructure investment in the UK is experiencing something of a revival after three decades of spending below many other OECD nations, according to a paper released by that organisation last year.

The UK government’s National Infrastructure Plan 2015 proposes £411bn of infrastructure spend by 2020/21. Some £264bn of this will be financed by the private sector.

What’s more, with the Budget due out next week, we may expect further updates on infrastructure spending, based on the prioritisation it was given in the Autumn Statement.

The environment for infrastructure investment in the UK is supportive on several fronts. Operators are incentivised to achieve productivity gains through a privatised and independently regulated system – a model that has proven very successful in sectors such as energy, transmission and distribution, water and railways.

So we have a sector that is seeing increasing private expenditure, but with long-term projects backed by the government – delivering investors a certain level of comfort that can be hard to come by outside of government bonds.

Generally speaking, infrastructure can deliver some key benefits for investors:

• Long-term contracts and public sector support typically mean a more reliable income stream than you might find investing in many other industries.
• Protection against inflation. Again because of the long-term nature of most projects, cash flows generated by the assets tend to be contractually linked to inflation.
• A low correlation to the business cycle and to other assets. Cash flows are usually not that dependent on the short-term economic outlook, as many of projects (schools, hospitals etc) are deemed essential regardless of conditions and, yet again, long-dated contracts provide some certainty around returns.

There’s a tendency to think roads and railways, but in reality the sector has a lot more to it. An infrastructure asset could be anything from a small, single doctor’s surgery to hospitals, libraries and schools; prisons; social housing; ports; renewable energy; and complex projects such as the London Crossrail.

Infrastructure investing can be done by taking a stake in a project or company via equity ownership, or by financing in the form of bonds. I am often asked how to play the sector, particularly after the Chancellor has opened his red brief case.

A new fund, VT UK Infrastructure Income, invests solely in UK listed infrastructure and seeks to take advantage of current trends. It is targeting 5% yield and in its short life, it has already shown its potential to be a low risk income play in troubled times.

The VT UK Infrastructure Income fund is unique in that it offers investors broad exposure to the sector by holding a mix of direct equity and bonds, as well as listed investment trusts – investment companies that trade on the London Stock Exchange just like shares, but in fact make their own infrastructure investments.

It is the only infrastructure fund on the market to be wholly focused on UK investments.

One thing that is worth keeping in mind is the outlook for domestic interest rates, as a rapid rise would present a bit of a risk for these assets. It would make it harder for the companies that have borrowed, as infrastructure companies tend to do quite heavily, to repay their loans and have cash left over for income payments.

Additionally, bonds and low-growth ‘bond proxy’ stocks with steady dividend yields have done particularly well in response to low interest rates. Some of these gains may be reversed when rates eventually start to rise.

However, the current forecasts indicate this won’t happen anytime soon—indeed there have even been suggestions of a further cut into negative territory—and given the level of government support, I’m still pretty positive on infrastructure as a dependable income diversifier right now.

For those who are after more global yield exposure, I also like the Elite Rated First State Global Listed Infrastructure fund.