Listed infrastructure stocks hit by short-term market moves
The rising interest rate environment is not correlated with lower returns for infrastructure stocks and market overreaction causes short-term underperformance of global listed infrastructure stocks, AMP Capital’s study said.
According to the report titled “Not just a bond proxy” global listed infrastructure was not a bond proxy anymore as sovereign yields rose around the world and the market overreaction led to short-term underperformance of global listed infrastructure stocks compared to global equities.
AMP Capital’s head of global listed infrastructure, Giuseppe Corona, noted that each meaningful increase in sovereign yields since the global financial crisis (GFC) saw global listed infrastructure underperform global equities on a short-term basis before recovering the underperformance within the next 12 months.
“What this shows is a market overreaction to a rising yields environment,” he said.
“A strong correlation between the performance of global listed infrastructure and its cashflow growth shows investors should focus on the underlying assets and their ability to generate visible and growing cashflows, and not be spooked by the dramatics of short-term market moves.”
According to him, investors should also consider the influence of rising yields in the context of listed infrastructure’s sector diversification as some sectors such as utilities, communication, transportation and oil and gas storage transportation were affected by changes to interest rates in different ways.
“Investors should always focus on the underlying assets and their ability to generate visible and growing cashflows because of the strong correlation between the long-term performance of the asset class and its cashflow growth,” Corona said.
AUTHOR
Oksana Patron
Recommended for you
BlackRock has taken a $25 million stake in Generation Development Group as the two firms announce a strategic alliance to design and distribute tailored retirement solutions.
The global asset manager is launching its second alternatives fund for Australian wealth clients, focusing on private equity investment opportunities.
Trading platform Selfwealth has officially delisted from the ASX, marking the final step of Svava’s acquisition plans as it implements a scheme of arrangement.
US alternative credit manager Apollo Global Management is viewing Australia as a “priority market”, as it launches a fund for Australian wholesale investors with Channel Capital.
