Institutional investors had shown strong interest in listed infrastructure over the last 18 months as competition for unlisted infrastructure has hotted up, according to Peter Meany from Colonial First State Global Asset Management (CFSGAM).
Meany is CFSGAM’s head of global listed infrastructure, and told a media briefing this week that his flagship fund had seen strong inflows from institutions.
“Our fund has traditionally appealed to the retail market but in the last period, large buckets of money from the insto space have flowed in,” he said.
“An Australian super fund, a Dutch super fund and a Swiss private bank have become investors.
“As allocations to infrastructure have increased, executing has been quite difficult because there haven’t been that many unlisted infrastructure assets available, and the demand has meant that prices have become quite expensive.”
Bottom-up active-stock pickers
CSGAM’s Global Listed Infrastructure is celebrating five years this month, with the $1.3 billion fun outperforming its benchmark – the S&P Global Infrastructure Index – by 20 per cent over the five years to June 30. Funds under management have doubled over the past 18 months.
Andrew Greenup, the fund’s senior portfolio manager, explained that the investment approach “was all about mispricing.”
“We are bottom-up active-stock pickers,” said Greenup.
The fund has invested in assets which it believes will deliver growth outside of the world economic story, and Meany mentioned two stocks in particular: Dutch-listed gas and oil storage company, Vopak, and mobile phone-tower provider, American Tower, both of which are active in Australia.
Vopak, said Meany, had storage assets in Australia and was benefiting from structural change away from onshore refining in Australia and around the world, a move which was driving strong demand for storage.
On American Tower, he said the company was a beneficiary of increased telecommunications coverage, which still had strong momentum despite the flat global economic conditions.
He also gave the example of the US railway sector, which was sold off after 2008 and had become, in the fund’s view, undervalued.
“We believe that the market overreacted in the global financial crisis, so we bought into stocks like CSX and Union Pacific, and we made 130 per cent on some of our investments there,” said Meany.
The CFSGAM briefing was themed around the “five myths” of investing in global listed infrastructure, which the fund manager said were:
- Listed infrastructure is highly correlated to equities.
- Infrastructure assets are low growth.
- You can already gain exposure to infrastructure through traditional equities.
- Infrastructure is too highly geared and therefore less defensive.
- Infrastructure is dependent on government funding.
“With property, you can by direct property or you can buy REITs,” said Meany. “So you can use the same argument and ask why not buy listed infrastructure?”