DEFINITION of 'Infrastructure'

The basic physical systems of a business or nation. Transportation, communication, sewage, water and electric systems are all examples of infrastructure. These systems tend to be high-cost investments, however, they are vital to a country's economic development and prosperity. Infrastructure projects may be funded publicly, privately or through public-private partnerships.


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BREAKING DOWN 'Infrastructure'

Sometimes private companies will choose to invest in a country's infrastructure development as part of a business expansion effort. For example, an energy company might build pipelines and railways in a country where it wants to refine petroleum. This investment can benefit both the company and the country.

Infrastructure is also an asset class that tends to be less volatile than equities over the long term and generally provides a higher yield. As a result, some companies and individuals like to invest in infrastructure for its defensive characteristics. Individuals and institutions can invest in infrastructure through infrastructure funds and can even choose specialized funds, such as those that invest in transportation infrastructure or water infrastructure.

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