Overall, tariffs will result in upward pressures on supply chains, with input prices keeping US inflation somewhat elevated, and slowing the pace of global trade growth. Ausbil’s view on tariffs under Trump is that the US is expected to benefit at the marginal cost of higher inflation.

Despite rapid change, the global growth outlook remains positive

Global macro settings are expected to remain within their ‘back to normal’ levels in 2025 and 2026, supported by a shallower global easing cycle.

We are forecasting a sustainable step-up in global growth to 3.5% for 2025, elevated but stable inflation relative to central bank target levels and limited real rate cuts. The recalibration of restrictive policy settings appears to have run its course, closing in a new higher neutral level relative to recent history.

The US Federal Reserve has pivoted and paused rates in the target range of 4.25-4.5% as “inflation remains somewhat elevated.” The structural themes of decarbonisation and accelerating de-globalisation will continue under Trump 2.0, and will underpin activity.

Taken together, global GDP is continuing on a positive upward trajectory towards its trend rate. Underlying resilient private demand, business investment, employment growth, and easier financial conditions will sustain the expansion of the global business cycle.

We remain vigilant with respect to unpredictable geopolitical events, including the risk of underestimating the impact from Trump’s tariff policies.

We are forecasting a resilient US, and a modest recovery for Europe.  The US growth outlook sustained in the mid-2% range will be driven by Trump’s pro-growth and pro-business policies.

Growth is driven by a resilient labour market remaining at full employment levels, underlying strength in the consumer from real wages growth, a positive wealth effect and private capex investment. The US is experiencing a sustained productivity uplift, where the pace has stepped up to 2.0% from a low pre- pandemic 5-year average of 1.4%.

Europe experienced shallow growth conditions that felt more like a recession, especially for Germany. We are forecasting a gradual recovery in growth, assisted by European Central Bank rate cuts. Year average real GDP growth was a subdued 0.9% in 2024, following 0.4% in 2023 and 3.4% in the post-pandemic rebound of 2022.

Inflation is under control but will remain elevated

We are forecasting elevated but stable inflation relative to central bank target levels in the US and globally.

Core inflation dynamics continue to see persistent sticky services inflation (ex-housing), moderating housing inflation at a much slower rate, and upside risk from goods inflation from potential supply and tariff driven input price shocks.

You can stop worrying about recession

In our view, lingering market fears of a US recession are unfounded and the risk is mitigated by the fact that central banks have significant room to cut nominal rates if recessionary signals eventuate.

The global economy is on a positive upward trajectory in 2025, with lower inflation and real rate cuts.

We remain vigilant on unpredictable geopolitical events that may materially impact our view. War in the Middle East remains a risk to the price of oil and supply chains. The war in Russia and Ukraine carries some existential nuclear risks. These risks are unpredictable but at this stage we do not expect material market disruption.

That said, underlying resilient private demand, business investment, employment growth, and multiple rate cuts are expected to sustain the expansion of the global business cycle.

By Jim Chronis, Ausbil Chief Economist, Associate Director – Debt and Diversifieds

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What does Trump 2.0 mean for global small caps?

Before Trump 2.0, we had isolated several key themes that are driving portfolio construction. These thematics remain intact and in some cases, we expect them to be accelerated under Trump 2.0.

This includes the electrification of things, AI and data centre demand, and investment in grid upgrade and expansion.

These growth drivers have benefited from significant fiscal stimulus in the CHIPS Act and the Inflation Reduction Act.  Trump 2.0 is expected to add deregulation, tax cuts and a general pro-business approach to governing that we expect to be incrementally stimulative for the US economy, especially in sectors like energy, industrials focused on US manufacturing, information technology firms in the data centre and AI complex and companies leveraged to electrification and grid upgrade.

As an example, Celestica, is a market leader in data centre networking equipment, headquartered in Canada, is expected to benefit from ongoing investment in US data centres, AI and networking efficiencies. President Trump’s recent announcement of the Stargate AI project, a US$500 billion joint venture between OpenAI, Oracle and Softbank, highlights the robust investment environment in technology.

The clear and present risk we are monitoring is that of tariffs, and the potential impact on the US and world economy. Tariffs and potentially strong growth in the US could lead to inflation accelerating again which may require the US Federal Reserve to end their interest rate cutting cycle and potentially consider tightening interest rates.

However, many of the small cap companies in the US undertake a lot of their manufacturing domestically therefore they are heavily insulated from the effects of tariffs, unlike their foreign competitors. Ultimately this could give a boost to US small-cap companies.

By Simon Wood & Tobias Bucks, Co-Portfolio Managers Ausbil Global Small Caps

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What does Trump 2.0 mean for global infrastructure

Trump 2.0 comes amid the multi-year infrastructure stimulus undertaken by the Biden government, and which we believe is unlikely to cease under Trump.

From an infrastructure perspective, it helps to look at Trump 1.0 for some help in extracting fact from rhetoric. Under Trump 1.0, in contradistinction to the fearmongering on renewables and fossil fuels, coal was retired more under Trump than any other prior administration, and renewables grew, albeit modestly. In fact, fossil fuel investment actually increased again under Biden, though against a rapid increase in clean energy investment.

While Trump failed to win a consecutive second term, this subsequent second term offers him four years to achieve his goals. In energy, Trump is looking back at fossil fuels in the form of LNG as a base load power to stimulate onshoring for the coming four years, releasing volume that is readily available.

However, the latent time delays for other power sources like gas turbines, hydro and nuclear, suggest that Trump will necessarily need to be supportive of wind and solar renewables that can be readily expanded during his term to achieve Trump

Trump’s energy goals and his policy for onshoring, protecting and expanding US manufacturing is a major driver of pipeline infrastructure for the liquification and export of natural gas as LNG. Both pipelines and rail are expected to benefit from better growth, more energy shipping, onshoring and ‘made in America’ protectionist policies.

Across all infrastructure sectors, Trump deregulation is expected to spark more M&A, and just as Australia liberalised the market and precipitated significant M&A activity, we believe the US should follow, subject to state and anti-trust considerations.

Artificial intelligence and data storage will also add to energy demand. These are areas that are benefiting under Trump policy with the announcement of Stargate, and his close relationships with a range of technology leaders. In infrastructure, we are agnostic as to which AI models may become dominant (like DeepSeek, Gronk, Gemini, Chat GPT, etcetera) as infrastructure will benefit from the overall rise in energy demand. In general, we expect that improved macro-economic conditions and reshoring will benefit all infrastructure sectors.

Risks to avoid

The markets ran hard in calendar 2024, and while Ausbil is calling calendar 2025 a period of ‘risk-on’ given the positive economic conditions, we still acknowledge that there is a real risk around valuations. We think that improving growth, and pro-business policies will help reduce this risk. Tariffs are likely to cause some distortions, but for contracted infrastructure assets, the risks are relatively low.

There are also potential currency risks. The US budget deficit will expand with lower taxes and potential interruptions from tariffs, however, the potential is for onshoring and resurging US manufacturing to offset this with greater productivity. Finally, the nature of Trump foreign policy is such that hard dealmaking could precipitate more geopolitical volatility, though looking back at Trump 1.0, where no major geopolitical disasters occurred, it is hoped Trump 2.0 will be similar.

Positioning for the macro-economic outlook

As we progress through 2025, we believe essential infrastructure stocks remain positioned for continued growth despite increased market volatility. President Trump’s administration is expected to introduce fiscal stimulus and deregulation measures, which could benefit US infrastructure investments such as rail, energy and utilities.

The AI sector’s rapid development is set to drive structural increases in electricity demand, further supporting North American utilities and energy infrastructure companies. LNG exports continue to play a key role in global energy markets, including Cheniere’s Corpus Christi expansion nearing completion, in which we have a holding.

In Europe, uncertainty remains elevated due to political instability and macroeconomic concerns. However, select infrastructure assets continue to offer attractive opportunities.

While infrastructure stocks have faced headwinds from interest rates, the fundamental case remains strong. We see valuations as reasonable and continue to focus on high-quality, well- positioned companies. Our long-term investment thesis remains intact, with a robust pipeline of opportunities in energy, transport, and across the utility space.

By Tim Humphreys, Head of Global Listed Infrastructure

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Tim Humphreys

Renewable energy companies are the typical ‘go-to’ exposure for the multi-generational thematic of energy transition. However, some renewable energy investments can carry higher risk.

An alternative way to play this transition, and one we argue with less risk, is through the regulated utilities sector. Utilities have a critical role in the energy transition, with attractive investment characteristics for long-term infrastructure and ESG focused investors.

The opportunity lies in the fact that utilities have been overlooked by markets, so far, as an essential part of the transition to renewable energy. We believe that is about to change.

Organisations like the United Nations have set targets for the transition to new types of cleaner and renewable energies, including wind, solar, geothermal, hydro-electric, hydrogen gas, and carbon capture utilisation and storage (CCUS), amongst the many examples. The Paris Agreement seeks net zero carbon emissions by 2050. The capital-intensive nature of energy development and conversion along the entire value chain means that the transition to full renewable energy may take several decades.

More and more governments are signing up to a ‘net zero by 2050’ target. For investors, this means we are still at an early stage in the development of renewables, and in the transition towards renewable energy dominated economies, and thus the opportunity to participate is rich with options.

Policy measures to tackle climate change are highly likely to strengthen over time, and their objectives made more ambitious. This current and emerging policy backdrop will continue to create more and more investment opportunities for the utility and renewable energy companies.

Pricing risk

As infrastructure investors, we are focused on the stability and predictability of a company’s cash flows. This is to ensure that the portfolio provides the characteristics investors expect of the infrastructure asset class – downside protection and low correlation to global equities – but at the same time, contributes to meeting our long-term return objective.

The most significant risk with investing in renewable energy companies is merchant (or wholesale electricity) pricing risk which also ties back to the contract/PPA tenure, and pricing applicable to each asset and the company overall. Nearly all renewable energy projects or companies carry a level of merchant pricing risk – it depends on what percentage of output is contracted and how this evolves over time.

Generally speaking, companies with meaningful merchant price risk (~20% or more of revenue) and with an insufficiently long weighted average contract/PPA duration (less than 10 years) do not display the cash flow certainty to qualify as Essential Infrastructure under our definitions.

The challenge with merchant price risk is the difficulty and complexity in forecasting electricity prices – both in the short term and longer term. Long-term electricity prices should converge towards long-run marginal costs and therefore are a function of expectations of future fuel costs (zero for renewables), capital costs, cost of capital, capacity factors and operating costs for different types of electricity generation. Therefore, and by definition, this is influenced by technological trends which are inherently difficult to forecast.

Also, renewable energy assets, particularly solar, can fall victim to their own success. That is, solar plants located in a similar region or even the same country tend to generate electricity in high correlation to each other (that is, when the sun shines it shines for all solar producers at once), impacting realised pricing outcomes.

This in turn can mean competitive electricity price outcomes increasingly displaying ‘duck curve’ characteristics – low prices during daylight hours, and higher prices at other times, meaning realised price outcomes for solar plants can be materially below average market prices, affecting their project returns. Batteries are increasingly being paired with solar to store this energy for use when it is of higher value.

For infrastructure investors longer term PPA contracts provide a high level of certainty of cash flows such that the tail risk, after the initial contracts expire, is less meaningful to achieving an overall acceptable risk-adjusted return. But, it is challenging for infrastructure investors to invest in these types of assets, which have exposure to competitive price outcomes or shorter term PPAs.

Investment opportunities

We are excited by a number of investment opportunities in renewable energy companies globally. Despite improving fundamentals, the share prices of many renewable energy companies globally have been under pressure, creating attractive opportunities for long-term investors.

Our most favoured renewable energy companies are NextEra (US onshore wind and solar) and Ørsted (global offshore wind), both global leaders in renewables in their fields. Both these companies are in unparalleled competitive positions to grow strongly, successfully execute and deliver attractive risk-adjusted returns for their shareholders.

In North America, many regulated electric utilities are integrated by nature, in that they own power generation assets that supply their customer bases, together with the poles and wires. These utilities are, in nearly all instances, undertaking significant investments in renewable energy (onshore wind/offshore wind/solar) and at the same time retiring coal-fired generation with an ultimate objective of reaching net zero by no later than 2050. These investments are being made within a ‘regulatory construct’, meaning attractive, but relatively low, risk adjusted returns for equity investors, while at the same time allowing infrastructure investors to really participate in the decarbonisation journey,

Critically, much of the electrical infrastructure in developed markets is ageing, requiring a wave of investment.

For investors seeking to gain exposure to the energy transition, investing in regulated utilities offers an attractive alternative to renewable energy companies as in most instances they display lower risk but comparable, and in some cases superior, return and growth profiles. The attractiveness of these investment opportunities, from an energy transition perspective, is commonly misunderstood or overlooked, however we suspect this will change. 

Go regulated

Regulated utilities can take the form of either: transmission and distribution companies (sometimes referred to as ‘poles and wires’); or ‘vertically integrated’ companies, where the utility owns the entire vertical supply chain – including generation, transmission and distribution electrical assets, all of which are fully regulated. ‘Poles and wires’ regulated utilities exist in Australia, the UK, Europe and also some areas of North America, and own the physical wires that transmit and/or distribute electricity. By contrast, in Ausbil’s Essential Infrastructure definition, ‘vertically integrated’ companies can only be found in North America.

Regulated utilities are critical enablers of the energy transition. Their role is to support the increasing role of renewable energy in the generation stack by investing significantly in the electricity grids. Major transmission investment in the form of high-voltage assets in particular is required to connect new renewable energy assets. Such investment also supports further interconnection between different electricity markets and countries, particularly important given the challenges associated with the intermittent nature of renewable energy. These investments are included in the rate base (or regulated asset base) of the regulated utility for which they are entitled to earn a reasonable return on, and of, capital, while also recovering their associated operating costs.

It should be also highlighted that investment opportunities for the regulated utilities are not confined to supporting the energy transition. There is a broader investment need to ensure the electrical grids are resilient and able to reliably supply energy as the climate changes.

For example, it is well understood that climate change is making extreme weather events more common (such as, hurricanes, wildfires and floods), creating ever-increasing challenges for infrastructure assets to maintain reliable and safe supply. This is driving another significant investment need, further enhancing the growth potential of this sector.

While regulated utilities are largely overlooked by the equity markets, there are huge long-term opportunities for low-risk, secular investment across major thematics such as the energy transition and climate change. Few sectors enjoy such powerful tailwinds, and that is why we believe that regulated utilities currently represent such an attractive opportunity.

The energy transition is clearly a complex challenge and there is some uncertainty over how it will ultimately be realised. Decarbonising energy systems requires balancing the sometimes competing objectives around the speed of decarbonisation, affordability and reliability of supply.

Companies and regulators need to balance the speed of decarbonisation initiatives with affordability considerations. There will also be different impacts across customer groups, at different points in time, and as large investments are made this can put upward pressure on end customer bills. This creates complex equity considerations that require a detailed understanding and analysis of policy responses and regulatory constructs. Assessing this level of regulatory detail is complex, and one of the reasons that we are confident we can find inefficiencies in how equity markets price these companies, and in so doing, showing outperformance potential in this asset class.

 By Tim Humphreys, Head of Global Listed Infrastructure

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Tobias Bucks

Ausbil Investment Management (Ausbil) is bringing together select global investment funds that offer investors an edge in global equity markets.

“Clients are looking for opportunities to diversify their portfolios, globally,” said Ross Youngman, CEO of Ausbil. “We are well positioned to do this from Australia given our relationship with New York Life and affiliates MacKay Shields and Candriam.

“We have brought together four global strategies that are designed to provide an edge in each of their markets, infrastructure, global small caps, natural resources and global fixed income.”

Ausbil is a recognised leader in core Australian equities with a long industry track record of performance dating back to 1997 – and it retains a focus on that.

As clients’ needs and the market itself has expanded to include greater allocations to global equities, Ausbil has drawn together global opportunities that benefit specifically from Ausbil’s top-down, bottom-up investment process, focused on earnings and earnings revisions as the key driver of stock prices.

An edge in global listed infrastructure

“Ausbil’s global listed infrastructure team focuses on the edge that comes from a very tightly focused definition of essential infrastructure that delivers superior upside and downside capture of returns across the cycle,” says Mr Youngman.

In contrast to a marketplace increasingly relaxing definitions of infrastructure, Ausbil defines essential infrastructure as a tight subset of core infrastructure, specifically just the assets that are regulated and contracted essential infrastructure for society.

“Our definition of essential infrastructure gives our portfolio an edge over the cycle in capturing some 89% of positive global equity returns in up markets, but just 50% of negative global equity returns^[1],” says Tim Humphreys, Portfolio Manager of Global Listed Infrastructure.

“Through the cycle, we have found that our definition of essential infrastructure demonstrates asymmetric returns skewed to the upside, meaning that it loses far less in falling markets than it is able to capture in rising markets. Over time, this generates positive compound outperformance for the essential infrastructure universe.”

Deploying global listed infrastructure equities that focus only on essential infrastructure companies brings the underlying benefits of these long, stable and essential assets through to the performance of their listed owners. Listed infrastructure equities add liquidity and genuine global diversity benefits that are not available in direct infrastructure and unlisted approaches.

An edge in global small caps

“In global small caps, Ausbil is focusing on the edge that comes from identifying unrecognised growth,” says Mr Youngman. “Our global small caps team applies both fundamental and quantitative approaches to finding companies with a growing earnings outlook that are either poorly covered by analysts, or are yet to be recognised for their earnings growth potential.”

The Ausbil Global SmallCap Fund has an investment universe that captures 23 global developed markets with over 4,000 securities.

“The beauty and potential in small-cap investing is the pool of opportunities, and the potential to catch the next Google or Facebook ahead of the global investment community,” says Tobias Bucks, Co-Portfolio Manager, Global Small Caps.

“We believe the true value is in finding this unrecognised growth, in companies that are also taking ESG considerations seriously,” says Simon Wood, Co-Portfolio Manager, Global Small Caps. “This means unrecognised future earnings growth, and unrecognised technology shifts which are yet-to-be-recognised by the institutional investment community. This is where the significant value potential lies.”

An edge in natural resources

 “In global natural resources, we see the edge coming through an absolute return approach, and in the deployment of long and short strategies to invest through the cycle, expanding both the opportunity set and ability to manage risk,” says James Stewart, Co-Portfolio Manager, Ausbil Global Resources Fund.

“Resources markets are unique and require highly experienced, dedicated investment teams with detailed technical knowledge and expertise,” says Luke Smith, Co-Portfolio Manager, Ausbil Global Resources Fund. “Natural resources are cyclical, with material alpha opportunities arising from volatility within the sector. If you want to reduce volatility and generate returns through the cycle, we believe an absolute return approach gives us an advantage.”

Alternative approaches to investing in resources such as passive ETFs and traditional long only funds mean investors need to ride significant volatility and the overall resources cycles. An absolute return approach solves for this with the ability to protect in volatile and down times, which contributes to overall long-term compound returns.

“As we are absolute return in focus, our resources team does not need to track an index or sectors that they would rather avoid, which helps in downside protection and investing across different markets,” says Mr Youngman.

Australia is one of the world’s leaders in resources, mining and related sectors. This global leadership has developed from a home market that is one of the dominant resources markets, with expertise that can be deployed to true advantage in global markets.

An edge in global fixed income

“In fixed income, we see a crucial edge as being the ability to invest in an unconstrained manner,” says Neil Moriarty, Senior Managing Director and Senior Portfolio Manager at MacKay Shields. “A long cycle of global monetary easing and a multi- decade bull run in bonds means that a nimble, unconstrained approach can make the most of fixed income markets.”

The MacKay Shields Unconstrained Bond Fund gives flexibility to negotiate changes in rate outlooks and build exposures across the credit and issuer spectrum, while avoiding unattractive risk.

“These four strategies each deploy an edge by design to make the most of what is on offer in global equity markets,” says Mr Youngman. “As a firm, we would add ESG integration in our investment decisions in all funds, and the expertise and experience of our people as sharpening the edge we offer investors.”

The Ausbil Global Investment Forum saw each of these four investment teams present on their edge in global markets. For advisers, this was an excellent opportunity to gather intelligence for their key client groups including high net worth, SMSF and retirement clients. The Forum was not presented to retail clients.

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[1] Based on performance of the Ausbil essential infrastructure universe using data from Bloomberg from 31 December 2005 to 31 December 2018. Capture ratios of the Ausbil essential infrastructure universe vs MSCI World Index equities performance, total return in USD

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Tim Humphreys

Tim Humphreys said “Next year is shaping up  to be an interesting time for financial markets as the post-Global Financial  Crisis bull market faces a key test: dealing with the US Federal Reserve’s rate  decisions. Some people believe low short-term interest rates have been positive  for financial markets and higher rates will therefore be negative. But markets are  not this simple and as long-term investors we are more focused on the long-term  borrowing cost and cost of capital.

“Much focus has been on the changes in the global oil market and the ‘lower for  longer’ crude oil environment, but our view is that we are in a ‘lower for  longer’ yield environment globally and despite an inevitable first rate hike,  we think the Fed will be cautious not to go too far as the rest of the world is  still weak.  Our view is that the strong  demand that we’ve experienced over the past decade for real assets that offer  high and sustainable yields will continue in 2016.”

Key trends for 2016: direct real estate

AMP Capital Global Head of  Property, Carmel Hourigan said: “Unlisted commercial property still provides  a very compelling investment proposition, particularly in Australia.   While cap rates continue to compress to historically low levels, Australian  real estate remains relatively attractive compared to other global markets and  asset classes and the income return alone is very compelling. Capital markets  will continue to be the most significant driver of investment performance  during the next 12 months.  Demand (particularly from offshore investors)  for high-quality Australian real estate is insatiable.  The fall in the  Australian dollar has only served to make Australian real estate more  attractive. The big differentiator to the last cycle is the fact that it’s  generally equity, not debt, driving pricing.  However, high quality real  estate is in limited supply and hence landmark’portfolio’ transactions are  commanding a lot of interest with a lot of domestic players priced out of the  race.  With major institutional investors from Japan, China and Norway yet  to put a toe in the water in Australia, we expect capital markets to remain  deep for some time yet.

“Double-digit  returns from unlisted core funds are likely to continue for a little longer but  funds need to be positioned for the next downturn.  We have been divesting  non-core assets to ensure portfolios are defensively positioned both in terms  of asset quality and location. Going into 2016, we have a strong bias to Sydney  and Melbourne office, and high quality regional shopping centres.”

Key trends for 2016: listed real estate

AMP Capital Deputy Head of  Global Listed Real Estate James Maydew said: “Europe is extremely  attractive; it’s in the early phases of significant monetary stimulus. Hard  assets with contractual income are well positioned to benefit from this and  listed real estate fits that criteria.  We  see great opportunity in certain core German cities – due to strong  urbanisation, immigration and net household formation – and Spanish office. We  expect certain Spanish markets to have some of the fastest growing rents in the  world over the next three years.

“M&A  is also likely to ramp up in 2016 globally as US Fed rate hikes create  volatility and dislocation in the markets.   This will present companies with a strong balance sheet and cost of  capital to acquire publicly listed real estate trading at discounts to the  direct market, given the ongoing arbitrage between the private and public  markets.

“Urbanisation  and infrastructure spend in global, gateway cities is also a strong theme.  Companies with assets or development  expertise in markets positively impacted by this structural trend will continue  to benefit in 2016 as rental values grind higher. London West End, Mid/Downtown  Manhattan and Central wards of Tokyo are large beneficiaries of this momentum,  and can be accessed via retail, office and residential depending on the city or  infrastructure project.  In Japan, there  is also value in the lodging sector, given the country is preparing for the  Olympics and the Rugby World Cup during the next four years and the government  has an explicit target to increase international visitors.”

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Outlook for real assets in 2015

AMP Capital, a long-term investor in real assets, expects further demand for prime real estate and infrastructure assets in 2015 as institutional investors such as global pension funds, insurers and sovereign wealth funds continue to search for more consistent income and capital preservation.

AMP Capital expects the real assets sector – incorporating listed and direct real estate and infrastructure – will be shaped during the next 12 months by:

• The end of quantitative easing in the US and that economy’s focus on growth
• The sheer weight of available capital continuing to drive markets
• Strong demand and competition for core assets
• Large mandates targeting large, lower-risk, higher-yield investments
• Major infrastructure investment in Australia and the state governments’ asset sales programs
• Continued investment in the US energy sector and its changing energy mix

Key trends for 2015: listed real estate

AMP Capital Deputy Head of Global Listed Real Estate James Maydew said: “Sovereign wealth funds and pension/superannuation funds will continue to lead the charge for both listed and direct real estate in 2015. Most major pension funds around the world have recently lifted their allocation to real estate, some as high as 15 per cent, using a mix of direct and listed. We expect to see continued deep pools of capital from all over the globe, especially China and Japan. The world’s largest pension fund, Japan’s Government Pension Investment Fund, is increasing its foreign equity allocation from 12 to 25 per cent and many Chinese investors are also increasingly mandated to invest offshore.

“For 2015, investors should look at the global gateway cities that are attracting both capital and growth such as London, San Francisco and New York. In an improving economic environment, investors should also be looking for economically-sensitive exposure with high growth such as the lodging and hotels sectors. Japanese developers are also an interesting proposition as they continue to recycle capital through their business amongst the back drop of rising asset values, rental growth and occupancy and falling capitalisation rates.”

Key trends for 2015: direct real estate

AMP Capital Head of Real Estate Capital Tim Nation said: “The fundamentals for office and retail markets in Australia are looking more positive than 12 months ago with the Sydney and Melbourne office markets having seemingly bottomed and green shoots now evident, and retail sales improving nationally. While yields are not expected to revert to pre-Global Financial Crisis levels, we believe there will be further yield compression in 2015.  The majority of total returns can be delivered via income and so while cap rates are fluid, a long lease to a strong covenant with fixed annual rental increases remains an attractive cornerstone in a diversified portfolio.

“We believe there is still relative value in the industrial sector where risk can still be priced, particularly for assets poised to benefit most from the huge infrastructure investment program currently underway on Australia’s east coast. For both offices and shopping centres, creating ‘places’ that people want to visit will be increasingly important for the real estate market in 2015 and beyond.  Office buildings must provide a flexible working environment and a wide range of amenities and shopping centres must create experiences that cannot be commoditised or replicated on the internet.”

Key trends for 2015: listed infrastructure

AMP Capital Head of Global Listed Infrastructure Tim Humphreys said: “US growth and its impact on interest rates will have the biggest effect in 2015. Rising interest rates should be an indicator of economic activity picking up, which in turn increases the demand for infrastructure. The US has experienced a rapid increase in natural gas and oil production from shale deposits and is the now the largest producer of petroleum and natural gas in the world. We expect these trends will require vast amounts to be spent on infrastructure, approximately $35 billion during the next 12 months alone.

“US energy infrastructure, specifically pipelines and other assets that have long-term secure contracts, offer a safe way to play the increased production of oil and gas in the US and Canada and offer the upside without the sensitivity of a direct exposure to the oil or gas price. Quality and diversification remain key fundamentals for 2015. High-quality companies have better managements and better assets and as a result they outperform over the longer term. Investors should focus on diversifying across regions and stocks. By looking globally, you have a much bigger pond to fish in.”

Key trends for 2015: direct infrastructure

AMP Capital Global Head of Infrastructure Equity Boe Pahari said: “Around the world, we continue to see direct infrastructure investment focused on utilities and other cash-yielding assets in 2015. In Australia, ports will also be strong while in the US, the power and midstream energy infrastructure sectors are likely to attract a lot of interest driven by excess gas supply and improving economic conditions. In Europe, airports and telecommunications infrastructure are expected to be hotspots of activity and we expect to see both increasing deal flow and greater investor confidence in countries such as Spain, Portugal, Italy and Greece.

“We’re expecting deal flow to be particularly strong in Australia, driven by the asset sale programs flagged by the New South Wales and Queensland state governments, and the US, particularly in the energy and utilities sector as well as in secondary markets. Europe, however, will likely have significant capital flows chasing relatively limited deal flow particularly for large-scale ‘trophy’ assets. We believe mid-market assets, which represent the biggest market, to offer the greatest opportunity for bilateral or negotiated sales processes and best relative value for investors.”

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Tim Humphreys

AMP Capital has made it easier for self-managed super fund (SMSF) investors to access listed infrastructure by adding its flagship global fund to the SMSF Suite.

The AMP Capital Global Listed Infrastructure Fund was established in July 2010 and the capability already has more than A$1 billion in assets under management from both institutional and retail investors.

The fund takes advantage of one of the biggest investment thematics globally: the need for both developed and emerging economies to increase their investment in infrastructure. This is driving strong performance in listed companies that are contributing to the infrastructure boom and, subsequently, the asset class.

AMP Capital Head of SMSF Tim Keegan said: “We have added the AMP Capital Global Listed Infrastructure Fund to the SMSF Suite because it can be difficult for SMSF investors to access the best opportunities in listed infrastructure on their own. Listed infrastructure is a relatively new asset class, which presents a lot of good growth opportunities particularly given our fund looks internationally for the best investments.”

AMP Capital Head of Global Listed Infrastructure Tim Humphreys said the fund only invests in what is considered ‘core and pure’ listed infrastructure assets such as water utilities, oil and gas pipelines, electricity transmission and distribution and transportation infrastructure such as airports, toll roads and seaports.

“We look for companies that deliver stable and predictable cash flows as this helps us deliver strong returns and downside protection to investors,” Mr Humphreys said. “SMSF investors can benefit from the diversification global listed infrastructure offers their portfolios while its high dividend yield will help them meet their income goals. It is also a low-risk way to access the growth potential of global equities.”

The SMSF Suite was launched in May with the AMP Capital Corporate Bond Fund and Wholesale Australian Property Fund. There has been a five-fold increase in flows to both funds since the launch of the suite.

Mr Keegan noted: “Through the SMSF Suite, we’re able to bring our customers unique investment opportunities they may not have otherwise considered or been able to access.

“SMSF trustees like the fact we’ve lowered the minimum investment for the Wholesale Australian Property Fund to $10,000 and they have also flocked to the Corporate Bond Fund, which is now the most popular AMP Capital fund among our SMSF clients.

“We’re looking forward to expanding the SMSF Suite next year to bring our customers additional investment options in equities, property and infrastructure.

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Tim Humphreys

AMP Capital’s Global Listed Infrastructure Fund has reached US$1 billion in assets under management amid strong demand from investors around the world.

The fund was established in July 2010 and is also one of the inaugural funds on AMP Capital’s newly-established UCITS platform. The platform gives institutional investors in the UK, continental Europe and Asia access to AMP Capital’s listed infrastructure and real estate capabilities.

The billion-dollar milestone comes as real assets play an ever-more important role in portfolios. Infrastructure is currently one of the biggest investment thematics globally and, according to McKinsey, more than US$57 trillion needs to be spent on infrastructure globally by 2030. The latest AMP Capital Institutional Investor Report found nearly 20 per cent of investors plan to increase their allocation to listed infrastructure, listed real estate and real estate investments trusts in 2014.

AMP Capital Head of Global Listed Infrastructure Tim Humphreys said: “Listed infrastructure bridges the gap between equity and debt in traditional asset allocation and is a flexible tool to use when constructing a diversified portfolio. It is a rapidly-growing asset class due to its unique features such as steady returns throughout the cycle, low correlation to global equities, lower volatility, high dividend yields and liquidity.

“Investors in the AMP Capital Global Listed Infrastructure Fund also like our unique philosophy of investing primarily in ‘core and pure’ listed infrastructure assets and focusing on both valuation and quality at the stock level to help deliver investors strong returns and downside protection. Some of the opportunities the fund offers are exposure to the game-changing shale gas and oil revolution and its global impact as well as the explosion in mobile data and the increasing importance of water around the world.

“This milestone reflects the expertise of our global investment team, which offers unique insights into the assets and companies we invest in as well as stock markets in general, and our proven investment approach. It also marks another highlight for the fund this year following the launch in April of AMP Capital’s UCITS platform. The platform is giving a new audience of global investors the chance to access the benefits of listed infrastructure through our fund.”

Among the ‘core and pure’ assets the Global Listed Infrastructure Fund invests in are water utilities, oil and gas storage and transport, transmission and distribution, social infrastructure, toll roads, airports and ports. The assets are located across a diversified range of regions. The investment team, which draws from the strength of AMP Capital’s 25-year history of investing in infrastructure, is located in Sydney, London and Chicago and, combined, has more than 97 years of related industry experience.

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