EM infrastructure attractive for investors
Emerging market (EM) infrastructure equity returns are significantly higher and offer investors rare opportunities, according to RARE Infrastructure.
The firm’s research of listed infrastructure covering the ten-year period found that while the value of EM infrastructure was expected to exceed developed market (DM) infrastructure by 2030, the annualised total return – dividends plus share price growth – of EM utilities was 9.62 per cent per annum versus 7.74 per cent per annum for DM utilities.
Additionally, according to RARE’s portfolio manager Charles Hamieh, the weighted average annualised price return (share price change) during this period favoured EM utilities 5.27 per cent per annum compared to 3.24 per cent per annum, “making EM the clear winner in total return terms”.
“If the end investor also seeks lower volatility for their investments, then regulated infrastructure companies in developed markets (DM), with tried and tested regulation, may suit even better,” he said.
“Proven regulation is more commonly found in developed markets for infrastructure stocks such as water, gas and electricity.
“As such, creating a portfolio of developed marker infrastructure companies chosen for their likelihood of offering sustainable growth in income and capital is logical.”
He stressed that another positive factor in relation to EM infrastructure was comparative economic growth rates of EM economies versus DM economies, with the International Monetary Fund (IMF) expecting the gross domestic product of EM countries to rise from 4.7 per cent in 2017 to five per cent in 2019.
“The two offsetting factors when considering the attractions of EM infrastructure investing are potential currency fluctuations and potentially higher volatility of EM infrastructure stocks versus their DM counterparts.”
Recommended for you
Perpetual has announced the outcome of a six-month strategic review and discussions with private equity giant KKR regarding its corporate trust and wealth management businesses.
GQG Partners has reported a decline in funds under management in April, but YTD inflows are approaching $10 billion.
Confusion around what classes as “sustainable” can lead to large fund performance differentials, making fund selection a material risk for advisers, according to Scientific Beta.
After five consecutive months of positive flows at Magellan, April saw $0.2 billion in institutional inflows offset by the same volume of retail outflows.
