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Infrastructure

Infrastructure sector missing uniformity

A tighter definition is needed for infrastructure to become a more consistent asset class and provide investors, including SMSFs, with a better understanding of the degrees of defensiveness between funds.

“I don’t think it is [uniform at present],” Maple-Brown Abbott head of global listed infrastructure and portfolio manager Andrew Maple-Brown said.

“People are still using very different definitions and you can just look at the volatility and the behaviours of the different funds are quite different, and there’s a big range that’s reflecting the definition and the differences within the sector.

“And it’s always a tricky one for the investors because every manager annunciates a similar story about using a tight definition and so forth, but we spend a lot of time trying to discuss some of the examples of stocks we don’t own but others do own to try to help that understanding.”

The investment manager was also interested in hearing about the challenges in terms of SMSF access to global listed infrastructure, as the Maple-Brown Abbott Global Listed Infrastructure Fund’s (GLI) strategy had been well-received this year and had received ratings from several research houses, and was also offered on eight to 10 of the major platforms.

“I suppose there is always discussion as to whether directly listing vehicles will make it more accessible and so forth,” Maple-Brown said.

“We haven’t been convinced about that, so we would love to learn more about the extent that they don’t have access, what’s holding them back, what’s causing the problem and can we rectify it in some way.

“We’re quite interested to see the outcomes [of new industry research reports] in terms of infrastructure and access because there might be an opportunity to bring out a new vehicle for SMSF investors.”

Commenting on whether advisers were aware of the differences between infrastructure funds, he said it was still an education process for investors and some advisers, but he believed researchers certainly were conscious of it.

“I think that the dealer groups are then, I suppose, very close to the research in terms of researchers within the dealer groups, but do the dealer groups then distribute their research and to what extent is that fully understood by their advisers?” he noted.

The company last week released its latest investment research paper, “The role of infrastructure in a portfolio”, which examined how infrastructure’s defensive characteristics could perform a significant role during times of economic uncertainty and market weakness.

Maple-Brown Abbott portfolio manager and author of the paper Steven Kempler said the qualities of global infrastructure suggested the asset class, when appropriately defined, sat somewhere between debt and equity on the basis of risk and reward.

“Infrastructure investors generally seek to benefit from the essential service nature and strong strategic positions of the infrastructure assets,” Kempler noted.

“Such assets are typically seen to provide a more defensive equity investment with lower cash-flow volatility than global equities.

“Infrastructure investing is also seen as a means of potentially increasing real income levels and providing an inflation hedge within a portfolio.”

Since its inception in 2012, the GLI (Unhedged) fund has outperformed its benchmark by 16.7 per cent on an annualised basis.

Over the same period, the fund exhibited less volatility, 10.6 per cent, than broader equity markets such as the S&P 500, 13 per cent, and the MSCI World, 12.6 per cent.

The strategy has over $1 billion in assets under management across both its hedged and unhedged options.

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