Infrastructure as a Defensive Macro Hedge: Evaluating John Hancock Infrastructure Fund (HPI) in a High-Inflation, Rate-Uncertain Environment

In an era marked by persistent inflation and central bank uncertainty, investors are increasingly turning to alternative assets to preserve capital and generate income. Infrastructure, with its long-term, inflation-adjusted cash flows and pricing power, has long been touted as a defensive macro hedge. But how does a specific vehicle like the John Hancock Infrastructure Fund (HPI) stack up in this context? This analysis evaluates HPI's role in a high-inflation environment, balancing its structural advantages against historical performance gaps and macroeconomic risks.

The Case for Infrastructure as an Inflation Hedge

Infrastructure assets—ranging from utilities to transportation networks—offer unique inflationary resilience. According to a report by BlackRock, infrastructure's operating and maintenance costs are often fixed, creating a natural hedge against inflation on the cost sideSizing up inflation – Institutional | BlackRock^[1]. Additionally, many infrastructure operators possess pricing power, enabling them to adjust fees in line with inflation while maintaining demand due to their essential nature or natural monopoliesSizing up inflation – Institutional | BlackRock^[1]. For institutional investors, this aligns well with long-term liabilities, offering risk-adjusted returns that often exceed traditional asset classesInfrastructure as an alternative | Features^[4].

Gold, another inflation hedge, has delivered a 1,075% return from 2000 to 2025, with annualized gains of 10.9%Infrastructure as an alternative | Features^[4]. However, gold's volatility contrasts sharply with infrastructure's stable cash flows. While gold excels as a store of value during crises, infrastructure provides consistent income—a critical distinction for income-focused investors.

HPI's Portfolio: Stability and Dividend Growth

The John Hancock Infrastructure Fund (HPI) seeks to deliver income and capital preservation, with a secondary focus on growth. As of 2025, its portfolio is managed with a Gross Asset Value (GAV) of $25.9 billion by Charter Hall Group, reflecting a long-term investment approach with occupancy rates averaging 8.5 to 8.8 yearsSizing up inflation – Institutional | BlackRock^[1]. This stability suggests a focus on durable, cash-generating assets.

Dividend consistency further strengthens HPI's appeal. Subsidiary dividend receipts have grown from $37 million to $91 million over recent yearsCover^[2], indicating a trajectory of income preservation and growth. For investors prioritizing regular cash flow, this trend is encouraging, particularly in a high-inflation environment where nominal income sources may erode.

HPI's Challenges in Rising Rate Environments

Despite infrastructure's inherent inflationary advantages, HPI's performance during past high-inflation periods reveals vulnerabilities. In 2017, rising interest rates pressured income-producing securities like preferred stocks and utilities—core components of HPI's portfolio—leading to declines in valueTicker: HPI Semiannual report 1/31/17^[3]. While energy-related holdings benefited from higher commodity prices, the fund's overall returns were constrained by macroeconomic shiftsTicker: HPI Semiannual report 1/31/17^[3]. This highlights a critical tension: while infrastructure assets can adjust pricing, their valuations remain sensitive to interest rate movements, which often accelerate during inflationary cycles.

Strategic Allocation and Income Preservation Considerations

For investors considering HPI as part of a defensive strategy, the fund's portfolio composition and dividend growth are compelling. However, its exposure to rate-sensitive assets like utilities and preferred securities necessitates caution. A diversified approach—pairing HPI with inflation-linked bonds or hard assets like gold—could mitigate rate risk while preserving income.

Moreover, HPI's role as a macro hedge is best realized in a long-term context. Its 8.5–8.8-year occupancy ratesSizing up inflation – Institutional | BlackRock^[1] suggest a focus on assets with enduring cash flow profiles, which can outperform during inflation if pricing adjustments are timely. Yet, in a rapidly shifting rate environment, liquidity constraints or delayed price adjustments could undermine this advantage.

Conclusion: Balancing Potential and Risk

Infrastructure's structural benefits make it a logical candidate for inflation hedging, and HPI's dividend growth and stable portfolio align with these goals. However, the fund's historical performance during rate hikes underscores the need for strategic diversification. Investors should weigh HPI's income preservation strengths against its interest rate sensitivity, using it as one component of a broader macro-resilient portfolio.