Global Infrastructure Stocks Set to Gain, Australian Fund Says
(Bloomberg) -- Investors looking to tap a possible resurgence of cheaper stocks should target infrastructure shares, according to a unit of one of Australia’s largest asset managers.
The sector missed out on the past year’s stimulus-fueled equity market rally, said Ursula Tonkin, manager of a developed-market infrastructure fund at Whitehelm Capital Pty. President Joe Biden’s plan for a clean U.S. power grid by 2035 will expand investment opportunities for the portfolio, she added.
“Listed infrastructure hasn’t participated as much in that rise, so performance on a relative basis is reasonably weak over the past 12 months,” Tonkin said in an interview. “Infrastructure is now cheap relative to global equities.”
Lockdowns and travel curbs sparked by the pandemic roiled parts of the infrastructure sector, for instance by idling airports and trains. Vaccine campaigns herald a return to something more like normal as well as faster economic growth, which could bolster the industry as a whole.
The FTSE Developed Core Infrastructure Index slid about 5% over the last 12 months, while the MSCI World Index rallied almost 24%. The FTSE gauge sits on a trailing price-to-earnings ratio of about 26, versus about 34 for the global index. But they are more evenly matched based on blended forward 12-month earnings.
Tonkin, who aims to keep the fund 50%-70% less carbon intensive than typical infrastructure benchmarks, is staying away from investments that are in danger of becoming obsolete as economies transition to net-zero carbon emissions. The fund doesn’t invest in assets linked to the oil and gas pipeline industry, as well as coal-related infrastructure, she said.
Tonkin sees opportunities in electricity transmission and distribution as more renewable energy projects are built. Power grid modernization, electric-vehicle charging networks, water utilities and communication infrastructure are also areas of interest, she said.
Tonkin said Biden’s clean-energy plans could make more utilities eligible for the Whitehelm Capital Listed Core Infrastructure Fund, which has outperformed about 95% of its peers over one year. Whitehelm is part of Fidante Partners, which oversees about A$72 billion ($57 billion) of assets as of December 2020.
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