In a report on the outlook for real assets in 2016, AMP Capital have announced a series of key themes set to influence the sector, including: intense competition for “trophy assets” and high-quality Australian property, the US Federal Reserve’s movements on rates, increased mergers and acquisitions activity and privatisation, a “lower for longer” yield environment, as well as urbanisation and infrastructure spend.
According to AMP Capital’s global head of infrastructure equity, Boe Pahari, infrastructure is a defensive asset class that is “highly competitive” with this competition set to intensify over the next 12 months as more funds are launched by managers.
“There is more money than ever before to invest in infrastructure. In addition, we are seeing a growing preference from large investors, particularly sovereign wealth funds and pension funds, to invest directly in infrastructure assets,” Pahari said.
“This increased activity across the asset class is putting upward pressure on pricing across most sectors, particularly large energy, utilities and transport assets.”
Andrew Jones, global head of infrastructure debt for AMP Capital, said that 2016 is expected to provide a “strong pipeline” of investment opportunities as a result of mergers and acquisitions activity and privatising programs driving increased global activity in the infrastructure debt sector.
“In the senior debt space, we expect liquidity from banks to continue to drive returns lower as competition for high-quality assets continues,” Jones said.
“In the less competitive mezzanine space, we expect returns to continue to be attractive, particularly on a risk-adjusted basis. Investors in infrastructure debt are looking for investments with high yield and stable returns.”
