Infrastructure sector investment opportunities are continuing to expand but they are not all created equal, according to Zenith Investment Partners 2012 Infrastructure sector review.
Jonathan Baird, Investment Analyst at Zenith said “Given the ongoing fiscal challenges faced by many developed countries and the accelerating level of infrastructure funding required, Zenith expects an increase in the opportunities for meaningful private sector involvement in the development of infrastructure assets. Similar fiscal issues are also leading to the privatisation of state-owned infrastructure assets in stressed countries in Southern Europe.”
“While there is strong rationale to suggest there is a significant pipeline of private investment opportunities it must be acknowledged that not all infrastructure assets are created equally, and not all private participation will occur with a similar risk return profile.”
“The level of regulation and the perceived security that it provides is one of the key consideration for many infrastructure assets,” Baird said.
Performance (over the last 12 months) has been strong, with the S&P/ASX Global Infrastructure Index ($A Hedged) returning over 18% for the 12 months ending 30 September 2012.
Of the eight global funds and one domestic fund that undertook the full due diligence process, three funds achieved the Zenith’s Highly Recommended rating, three funds achieved a Recommended rating and one fund was received an Approved rating.
International Ratings
- RARE Infrastructure Value Fund – Highly Recommended
- RARE Infrastructure Value Fund – Unhedged Highly Recommended
- Magellan Infrastructure Fund Highly – Recommended
- CFS Wholesale Global Listed Infrastructure Securities – Recommended
- Lazard Global Listed Infrastructure Fund – Recommended
Emerging Markets Ratings
- RARE Series Emerging Markets Fund – Recommended
Domestic Markets Ratings
- Goldman Sachs Wholesale Australian Infrastructure Fund – Approved
Baird, also discussed the inclusion of listed infrastructure funds in client portfolios.
“Infrastructure assets typically provide a long-term reliable income stream, which is resilient to changing economic conditions, and is largely protected from inflation.”
“Zenith believes that over the longer-term, the inclusion of listed infrastructure in an investor’s international equities exposure provides significant diversification benefits, with the potential to improve the risk/return profile of the overall portfolio.”