Infrastructure Funds: Understanding the Risks & Challenges

Infrastructure funds are a type of mutual fund that invests in companies that are involved in infrastructure work in particular areas. While this type of investment might seem attractive to you, there are a few risks that you should be aware of.

Liquidity

One of the biggest potential risks of this type of investment is the lack of liquidity that often comes with it. Many of these projects do not have very many investors which makes it difficult to sell your shares at a fair price. It may be difficult for the mutual fund company to get into and out of particular stocks which will decrease the profitability of the fund.

Outside Variables

With this particular industry, there are a lot of outside variables that could affect profitability. For example, you are relying on the workforce of the companies to remain intact. The workers could go on strike and this would significantly affect the profitability of the fund. If prices for the materials that go into the construction of the infrastructure increased significantly, this can also negatively impact the fund. These projects generally have fixed budgets and if the costs go up, this lowers the overall profit.