Home / Strategy / AMP on Listed Infrastructure

AMP on Listed Infrastructure


Notwithstanding the political and superannuation industry talk of an infrastructure-led economic recovery in Australia, and elsewhere, the listed infrastructure sector has been looking decidedly unloved of late. And much of the sector’s underperformance against the broader market this year has not been justified in terms of company earnings.

Guiseppe Corona, the London-based head of global listed infrastructure for AMP Capital, told a client webinar last week (September 16) that to understand what had been a relatively “unique period” for the sector, investors needed to think about its makeup. About 45 per cent is in transport and energy, which have been the most adversely affected, and 55 per cent in defensive utilities and communications, which have fared better.

“About 65 per cent of the sector’s share price decline of 20 per cent in the first quarter was not justified by company earnings,” Corona said. “For example, Gibson Energy, a Canadian-based company which is one of AMP’s four largest portfolio investments, now has a valuation approaching what it had in 2015-16. It was down 50 per cent in less than a month. This is despite having a much better cash flow profile than it had previously. For us, what was happening in the market then was a complete joke. It pains us because our investors lost money. But now it has almost fully recovered, down about 6-7 per cent.”

  • He said that AMP took advantage of the dislocation, where the markets had over-reacted to the downturn. “Companies like Gibson are a no-brainer. Gibson is the owner of storage facilities and its assets actually became more valuable,” he said.

    Within the energy infrastructure sector there were parts of the industry which did well. Gas assets (flavour of the month with the Australian government) which are not associated with oil did fairly well, according to Joseph Titmus, a Sydney-based portfolio manager. He said: “Communications sector growth has been at a very high rate, but we think that is fully reflected in valuations, so we are underweight… North America was the most negative region in the year to date, while Australia was slightly positive.”

    Asked about the AMP listed infrastructure fund’s local exposure, he said: “We’re a small country with only a handful of listed infrastructure companies compared with hundreds globally. We will never land with a big weighting. We added a couple of [Australian] stocks this year due to some dislocation. But valuations have been historically elevated in Australia. Our Australian exposure is less than 5 per cent.”

    AMP’s two over-riding factors driving its listed infrastructure style are value and quality. Other types of managers, such as growth and momentum managers, may not be so shy of what AMP considers over-valued local stocks. One of the anomalies of listed infrastructure in general, and particularly in Australia, is that there has for several years been little-to-no premium paid for liquidity compared with the private market infrastructure projects which dominate the infrastructure exposures of big super funds. Sometimes it is possible to buy a piece of a particular project more cheaply through the listed market than the private market, despite the liquidity advantage of the listed market. In the case of the AMP Capital Global Infrastructure Securities Fund – unhedged – further liquidity is available to individual investors through its BetaShares ETF version of the strategy (ASX code: GLIN).

    The absolute performance of the AMP fund has been good, largely delivering on the past medium-long-term target return of 10 per cent after fees per year, notwithstanding the listed sector’s poor performance over the past 12 months to August 31. The AMP fund beat its benchmark Dow Jones Brookfield Global Infrastructure Index with minus 11.0 per cent (after fees) against the index’s minus 14.2 per cent, although that is probably cold comfort for investors. It also beat the index by 1.3 per cent with a 5.5 per cent return over three years, was line-ball with the index over five and seven years and slightly ahead of its medium-long-term target with 10.9 per cent over 10 years.

    Unfortunately, while the long-term performance was commendably true to label, so was the index. The benchmark also returned 10.9 per cent over 10 years, which does nothing to dissuade us from continuing the argument about active versus passive management. In listed infrastructure, possibly more than most asset sub-classes, there will always be room for active managers who are historically more likely to outperform passive in down markets.

    About $2.2 billion of AMP Capital’s $33 billion in total infrastructure investments are in its listed portfolios. The firm has seven specialists handling the listed market – four in London and three in Sydney – alongside a total of 90 staff working on infrastructure around the world. It has a universe of stocks from which to choose of about 600 but distils this down to a core of 200 which suit its quality and value requirements.


    Print Article

    From Covid to conflict, the issues set to drive markets

    From Covid to conflict, all it took was just a few weeks for the market to shift its attention to the unfolding crisis in Ukraine and away from the pandemic. The crisis disrupted supply chains and triggered record-high inflation which forced central bankers to raise rates to contain the rise. What came next, was a…

    Ishan Dan | 19th May 2022 | More
    Super wars renewed by Morrison ahead of election

    Once a stalking horse for a small cabal of noisy backbenchers, “Home First, Super Second” has found its way into the Coalition’s policy arsenal ahead of an unpredictable election. It was perhaps premature to write, in late March, that the super wars were over. Scott Morrison’s announcement on Sunday that first home buyers would be able…

    Lachlan Maddock | 19th May 2022 | More
    Good time to buy quality semiconductor companies, say experts

    For investors looking to build positions in quality technology firms, the US computer chip giants are trading at attractive price levels, with many brokers now rating them as a buy, according to data from the Wall Street Journal. The prices of semiconductor companies have dropped sharply this year amidst a broader sell-off in technology stocks…

    Nicki Bourlioufas | 19th May 2022 | More
    What does High Conviction mean?
    Ishan Dan | 18th Mar 2021 | More
    Evergreen ratings highlights new venture capital prospect
    Ishan Dan | 18th Nov 2021 | More
    FASEA exam extended nine months*, waiting period waived
    The Inside Adviser | 12th Jul 2021 | More
    Top hedge fund award goes to L1 Capital
    Greg Bright | 13th Dec 2021 | More
    Better Advice Bill changes enter consultation
    Staff Writer | 30th Sep 2021 | More
    IN60 with Andre Roberts from Invesco
    The Inside Adviser | 18th Oct 2021 | More