Only one infrastructure fund saw a positive return in the first half of 2020, as the sector was hit by the falling value of key equities like airports and toll roads.
According to FE Analytics, within the Australian core strategies (ACS) universe, the infrastructure equities sector lost an average of 12.25% since the start of the year to 30 June, 2020.
The Mercer Global Unlisted Infrastructure fund returned 3.66%, the only fund in the sector to post a positive return.
The fund invested in around 80 underlying assets invested across six managers with the single biggest exposure to an individual manager being 30% and the single biggest exposure to an asset being 8%.
Mark Murray, Mercer portfolio manager – unlisted infrastructure, said the fund had a relatively lower exposure to airports, which helped mitigate losses.
“Airport exposures are about 4%-5% of our fund whereas in investor portfolios airports will be in significantly higher exposures,” Murray said.
“We’re invested in communication assets that in some cases have benefited from what we’re going through because of social distancing, [which] have been in the order of about 20% of the fund.”
Murray also cited energy generation assets, particularly renewable energy, as producing a positive return.
“At the moment, there should be a big dispersion of returns because different investors have much different exposures to different types of infrastructure assets,” Murray said.
The pandemic had called into question the defensive characteristics of some assets within infrastructure.
“It seemed like the case that airport passenger volumes went up and up, with minor blips because of 9/11 or SARS,” Murray said.
“Those events were severe, but in terms of their impact on passenger volumes at airports, it didn’t seem to have that much of a long-term impact.
“Whereas COVID-19 has evidently had a much clearer and stronger impact on passenger volumes; same with toll roads which are affected by the fact that so many less people are travelling each day.
“Some assets appear to benefit from gradual increase in volumes linked to economic and population growth, but the pandemic shows those assets aren’t bulletproof.”
Some defensive assets were still protected, like regulated utility assets as well as contracted assets which had guaranteed returns.
“Contracted energy assets, and other contracted assets like communications, have been well protected by their contracted nature,” Murray said.
“Social infrastructure assets like hospital and schools continue to be solid investments because the performance is not linked to how many people go to school or hospital.
“It’s just about maintaining the availability of those facilities for anyone that does want to use them and investors are compensated on that basis.”
Best-performing infrastructure equity funds versus infrastructure sector since the start of the year to 30 June 2020
