He says the supremacy of the unlisted model was beginning to play out, as large sovereign wealth funds began snapping up heavily indebted, “stranded” listed infrastructure assets at a 20 or 30 per cent premium to their market value, which still represented deep discounts to their intrinsic value. Such gearing problems do not exist in the potential markets for listed infrastructure in emerging markets, although the governance concerns certainly do. Meany says that his fund has discretion of up to 20 per cent to invest in developing markets but has only ever invested up to 4 per cent in these markets. “The challenge is getting the transparency and disclosure. If you don’t speak Mandarin or Portuguese it can be difficult to get access to the CEO of an asset, and there are many examples of governments reneging on contracts.”
The CFS GAM listed infrastructure fund has limited exposure to China through some gas utilities, Meany says, which are actually seen as growth stocks correlated with China’s urbanisation and residential development. Whereas China’s electricity providers are “price takers” – with the Newcastle coal price being the best guide to these providers’ marginal costs – Meany says gas supply is tied to more stable, longterm “offtake” contracts with retail prices fixed for at least five years. However the fund is serious about accessing more opportunities in China and greater Asia, recently appointing its first offshore analyst, Jin Xu, who will sit with CFS GAM’s emerging markets equity team in Hong Kong. Still, Meany’s favourite way to access emerging markets is through companies listed in the developed world, such as Dutch oil storage firm Vopak. “It derives 40 per cent of its income from Asia and the Middle East, yet we have excellent access to its management team, and the company is dealing with the same counterparties in emerging market ports as those we know and understand in its developed market business.”
