The infrastructure equity, geared Australian equity, and European equity funds sectors were the worst equity sectors to have been invested in last year, according to data.
FE Analytics data found that, within the Australian Core Strategies universe, the sector average return for infrastructure equity funds was a loss of 8.96% in 2020. This was followed by a loss of 5.73% for geared Australian equity funds and a loss of 5.49% for European equity funds.
Worst-performing equity sectors in 2020
Source: FE Analytics
The three sectors fell sharply during the global market sell-off induced by the COVID-19 pandemic and none had since recovered.
Within the infrastructure equity sector only three funds out of 52 managed to make a return last year. These were Mercer Global Unlisted Infrastructure at 12.8%, RARE Infrastructure Income B at 7.02%, and RARE Infrastructure Income A at 6.5%.
The Mercer fund was also the only fund to regain losses since the March sell-off.
On the other end of the scale ETFS Global Core Infrastructure lost the most during the year at a loss of 26.2%. This was followed by RARE Emerging Markets (-19.24%), ClearView CFML RARE Emerging Markets (-19.11%), 4D Emerging Markets Infrastructure (-17.4%), and AMP Capital Global Infrastructure Securities Unhedged H (-16.5%).
Top and bottom performing infrastructure funds during 2020
Source: FE Analytics
RARE Infrastructure (now ClearBridge) said its global income fund had performed strongly in the last quarter of 2020, inline with infrastructure and global equity indices which rose as two effective COVID-19 vaccines had been approved for use in many countries.
“The vaccine announcements raised hopes for higher economic growth as well as a return for travel and leisure, lifting cyclical areas of the market and economically sensitive user pays infrastructure assets. Renewables continued their strong performance, while energy rebounded,” it said.
The fund’s North American stocks was the top contributor to its quarterly performance with Canadian renewables utility Brookfield Renewable Partners and US renewables utility Clearway Energy as lead performers.
The fund said with Joe Biden’s Presidential election win and democratic control of the Senate in the US was a positive for US infrastructure. Gas, electric and water utilities, rail, and wireless tower sectors had positive drivers stemming from Biden’s policy plans and a likely promotion of private sector investment in infrastructure.
RARE’s co-chief executive officer and co-chief investment officer, Nick Langley said at the end of 2020: “Looking ahead, we see a lot of infrastructure projects being accelerated as governments look for opportunities to support local economies.
“These will likely be skewed toward a diverse range of ‘local’ projects, using local materials, aggregates, labour and contractors. We expect a number of these projects to be financed by the private sector and ‘paid for’ by extending concession agreements. These are often neutral to near-term earnings but accretive to value and are often missed by the market.”
Langley noted that he was bullish about utilities this year as it was hardly impacted by the pandemic, and that he saw opportunities in the transport space.