The average infrastructure fund has lost 15% over the three months to 31 March as the lockdown restrictions impact toll roads, airports and oil pipelines but this remains a higher rate of return than Australian equities.
Using FE Analytics, there were 53 funds in the infrastructure equity sector within the Australian Core Strategies universe and the average fund had lost 15% over the period, compared to losses of 22% by Australian equities.
Over 12 months to 31 March, the sector had lost 6.8% versus losses of 14.2% by the Australian equity sector.
Performance of infrastructure and Australia equity sectors over one year to 31 March, 2020
However, it lagged its global equity counterparts with the global equity sector losing 10.7% over the three months to 31 March and 0.9% over the 12 months to 31 March.
Among the best-performing infrastructure funds were Vanguard Global Infrastructure, Macquarie Global Infrastructure Trust and AMP Capital Core Infrastructure A which had only seen losses of between 4.6% to 6%.
According to its factsheet, the Vanguard Global Infrastructure fund has 35% in electricity, its top holding, and 16% in railroads and 12% in pipelines.
As well as lockdowns and border closures restricting travel and affecting airports and toll roads, the fall in the oil price was affecting oil and gas pipelines. The price of brent crude oil has fallen from US $66 ($103.7) per barrel at the start of the year to US$29.
Andrew Greenup, deputy head of global listed infrastructure at First Sentier Investors, said: “Oil and gas pipelines and storage are under pressure from both demand and supply problems in global energy markets, leading to lower prices, lower customer creditworthiness and higher risk of standard assets”.
Andrew Maple-Brown, co-founder and managing director of Maple-Brown Abbott Global Listed Infrastructure, said, unlike airlines, the energy sector was unlikely to receive any Government support.
“There is greater uncertainty on the long-term impact of the current oil price war on the North American pipeline sector. The domestic energy sector is less critical to enabling an economic recovery, and so energy producers are unlikely to receive the same level of Government support as airlines,” he said.
“The fiscal stimulus being applied might be viewed as being better directed at the renewable sector than fossil fuels, and so may hasten the long-term switch to cleaner energy. These risks may not manifest, however we view the outlook as more uncertain and so are incrementally cautious that some energy pipeline companies could become value traps.”
Dan Cave, senior investment analyst at Zenith Investment Partners, said: “A large contributor to GLI’s negative returns has been the transport-related segments of the infrastructure market (airports and toll roads), which have been some of the hardest hit due to large falls in patronage levels.
“In contrast regulated utilities have outperformed global equities as their regulated earnings are more resilient due to their essential role in society, especially in a COVID-19 shutdown.”
