AMP Capital has added a second infrastructure fund to its offering for SMSF trustees as the opportunity for low-risk returns and stable income streams drives greater interest in the asset class.
The Core Infrastructure Fund was added following growing trustee interest stemming from two key reasons, AMP Capital Core Infrastructure Fund portfolio manager John Julian said.
“There is a growing recognition that infrastructure is able to provide good returns and also at a relatively low level of risk compared to other asset classes such as, for example, listed equities,” Julian told selfmanagedsuper.
“To illustrate that, the Core Infrastructure Fund over the five years from 31 December 2015 delivered 162 per cent of the return of Australian equities with only 40 per cent of the volatility, which is a very powerful statistic, so the potential of infrastructure to offer decent returns at a low level of risk is something that is increasingly becoming recognised.
“The other key factor is the fact that the infrastructure asset class has the capacity to provide consistent stable income streams – the revenues that they generate are often underpinned by regulation or by long-term contracts, giving them a level of stability and visibility that other asset classes do not necessarily enjoy.
“In addition to that, the revenues are often linked to inflation, which helps protect investors against the erosion of the value of their money by inflation.”
He said with the fund delivering a consistent income stream of 6.4 per cent a year since inception as well as attractive long-term overall returns, the fund was receiving interest from those in the retirement phase as well as investors looking to grow their portfolio over time.
The fund invests in a targeted 50/50 mix of direct infrastructure and listed infrastructure securities, with the latter providing investors with liquidity.
SMSF trustees can invest in the fund via the SMSF Suite with a minimum investment of $10,000.
Commenting on the low entry point, Julian said infrastructure had very much been the territory of very large investors.
“But with the launch of the Core Infrastructure Fund in our SMSF Suite we have tried to make it accessible to a much broader range of investors,” he explained.
“That $10,000 is broadly in line with the minimum entry requirements for our other funds in the SMSF Suite so I suppose there is an element of it fitting neatly in that respect as well.”
Julian added that at this point in time, the 50/50 combination was a sensible allocation and there was no intention to change the mix.
He revealed the fund demonstrated the differences in terms of where infrastructure opportunities were currently.
“For example in the United States, there is a very big listed infrastructure market and probably we are not seeing as many opportunities in the direct space in the US,” he said.
“Conversely, in Europe we’re seeing a significant amount of unlisted infrastructure opportunities and similarly in Australia there are obviously a number of listed infrastructure companies on the Australian Securities Exchange, but we are also seeing some interesting opportunities in the direct space here.”
The SMSF Suite was launched in May 2014 and includes the Wholesale Australian Property Fund, Corporate Bond Fund, Global Infrastructure Securities Fund and Dynamic Markets Fund.
AMP Capital said it was constantly reviewing its SMSF Suite with the intention to bring those unique investments to trustees and would look at reviewing its mix to potentially add further funds.
