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Australian unlisted infrastructure continues to perform well

by Reg Clodfelter

IPD has released its Australia Quarterly Unlisted Infrastructure Index, which reports on the investment return performance of Australian-domiciled unlisted infrastructure funds and mandates, for the quarter ending Sept. 30, 2013, and the numbers continue to look encouraging for the infrastructure sector.

The 20 funds represented in the index delivered a total annual return before fees of 16.2 percent, which represents only a slight decrease of 58 basis points from the annual return posted in June 2013. The 16.2 percent return is a major improvement from the 10.5 percent annual return the index posted in September 2012, driven by strong capital returns, which increased from 7.8 percent to 11.8 percent during that period.

According to Anthony De Francesco, executive director and head of Australia and New Zealand, IPD, “Unlisted infrastructure’s strong return profile and stable income streams will be viewed by investors as an attractive alternative investment class to equities, bonds and real estate.”

Although Australian unlisted infrastructure was outperformed during the previous 12 months by listed infrastructure (27.2 percent), global listed infrastructure (25.3 percent), equities (25.1 percent) and A-REITs (17.2 percent), it has outperformed all of these sectors, as well as bonds and unlisted property, in annualized average return over the 10 years to September 2013, posting a 12.9 percent figure. Over that period, Australian unlisted infrastructure has seen steady growth with only a mild downside during the global financial crisis as compared to other asset classes, providing a relatively strong level of stability.

The sector’s asset allocation at September 2013 is heavily weighted toward transportation (30 percent) and airports (29 percent). The majority of the remaining 41 percent is divided among seven other asset types: communications, water, renewable energy, power transmission, power generation, cash and public facilities. Infrastructure assets that do not fit into these categories make up only 1 percent of assets in the index. Other than transportation and airports, power generation is most heavily represented in the index, comprising 10 percent of the assets in the index.

The 20 funds represented in the index are divided among eight managers and cover 153 investments with a gross asset value of A$28 billion ($26.6 billion). Geographically, the fund is weighted toward Australia with 66 percent of the index composed of Australian assets and 34 percent located offshore. IPD produces more than 120 indices each year, helping real estate market transparency and performance comparisons, as well as nearly 600 benchmarks for client portfolios.

 

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