One of CFS GAM’s new competitors in global listed infrastructure is AMP Capital Investors, which likewise thought little of the indices on offer, to the extent that it developed its own in conjunction with global property and infrastructure joint-venture partner, Brookfield Investment Management. Speaking last month, AMP portfolio manager Craig Noble said the index – the Dow Jones Brookfield Global Infrastructure Index – gives much more weighting to the energy sector (gas pipelines and electricity) than other available indices, and also more weight to water and communications. AMP Capital Investors launched its global listed infrastructure fund in bizarre circumstances last month, poaching three analysts from domestic boutique RARE Infrastructure (whose co-founder Nick Langley is himself a former AMP fund manager) only to see one of its own senior analysts for the asset class, Charles Hamieh, go the other way.
For Meany, it’s all a sign that listed infrastructure is set to become a more popular and highly contested asset class than it has been in the past. “If you look at a lot of the super funds, they have that sizeable allocation to infrastructure, but to date it has mostly been through unlisted trusts. They have obviously encountered issues there in terms of transparency of valuations and fees. “ Rather than experiencing a lag in valuations and then a nasty shock as their unlisted infrastructure portfolio ‘caught up’ with listed assets after being marked to market, Meany says listed infrastructure allows the identification of opportunities trading below their tangible asset value. This continues to include many of the Australian listed infrastructure stocks, although Meany observes these are in a slow process of “cleaning up their gearing levels and their governance”. He cites Macquarie Airports as an example. It internalised its management, saving millions in annual fees to the mothership, and has reduced its gearing ratio from 80 per cent to 60 per cent. “They’re getting there, but airports should be running at more like 40 per cent because their valuation driver – passenger numbers – is so volatile,” Meany says.
However he points out there is limited upside in an airport such as Sydney’s, which is “operating at twice the efficiency of a Vienna or Paris airport in terms of capital utilisation“ around income sources like retail and parking, and is subject to binding caps on the number of aircraft movements per hour. “They can’t really milk any more out of that asset, yet it’s trading at 14 times earnings versus eight times for some of these European airports.” Gearing, governance gripes Concerns about leverage are what continue to keep one of Australia’s best-known infrastructure investors, Access Capital Advisers, away from any allocation to listed infrastructure vehicles. “Listed infrastructure assets will always face that pressure from the stockmarket that says you have to generate growth, so you pile leverage on leverage. That mentality stops listed infrastructure exhibiting the core, defensive characteristics that we are going for,” Alexander Austin, CEO of Access, says.