Infrastructure fund manager Sarah Shaw has admitted airports failed to provide the expected defensiveness but said she remained confident in their future.
In a roundtable, Shaw, who manages 4D Global Infrastructure, said the temporary closures of airports during the COVID-19 pandemic was an “unusual situation”.
Airports had been an increasing weight in infrastructure funds as they offered numerous sources of revenue and acted as a defensive allocation but this caused problems when they closed due to the travel restrictions.
Shares in ASX-listed Sydney Airport and Auckland International Airport fell 31% and 33% respectively since the start of the year to 25 May, compared to losses by the ASX 200 of 14%.
Shaw said: “This was an unusual situation and airports have seen an economic impact from COVID-19 but they have reacted well and tried to cut their fixed cost as much as they can, putting staff on hold and addressing liquidity conditions.
“There will be a hard impact on airports in 2020, they justify a correction but not the 40% to 50% that we have seen. I agree they have not been defensive assets but now we are expecting them to re-open faster than forecasted.”
She said the fund, which had 8% in airports, would not be these exiting these positions but that it was rotating into larger positions to utilities as the earnings of these type of companies were more resilient. Exposure to electric and gas utilities was 29% of the fund, its largest weighting.
Meanwhile, she said there was a strong case for increased infrastructure investment as a form of recovery as the world came out of lockdown.
“For every $1 invested in infrastructure, there is a $3-4 economic impact, infrastructure can fast-track an economic recovery and we saw that in China’s investment in high-speed rail after the Global Financial Crisis. Europe especially is fast-tracking investment in green energy.”
The 4D Global Infrastructure fund lost 3% over one year to 30 April, 2020, versus losses of 4.4% by the infrastructure sector.
Share price performance of Sydney and Auckland Airport versus ASX 200 since the start of the year to 25 May 2020
