Building a Brighter Future with
We firmly believe in the power of long-term investment to generate stable and reliable returns for our clients. Through our research-driven investment process, we prioritise the safeguarding of our clients’ investments by providing both stability of returns and maximising opportunities for growth.
Our rigorous three-stage investment process in a nutshell:
Research and due diligence
Research forms the cornerstone of our investment approach. Our experienced team conducts comprehensive research to identify infrastructure sectors and assets that offer superior risk-adjusted returns.
Our investment process initially screens out companies with inappropriate levels of risk for a core infrastructure strategy. These include those companies that:
- are burdened with a difficult regulatory or economic environment;
- have poor management not focused on shareholder best interests;
- are too highly indebted;
- are not responding to technological change in an effective manner.
As a value style manager, we consider the fundamental drivers of return at the individual business level by calculating the intrinsic or fundamental value of an infrastructure company’s assets on a per share basis.
We then identify instances where current market value has disconnected from the long-term intrinsic value of the company, providing an opportunity for a patient investor to generate outperformance. Listed companies can trade at large premiums or discounts to intrinsic value as a result of market sentiment and factors unrelated to the fundamental, long-term prospects of their respective businesses.
The power of the economic cycle
- Economic infrastructure assets (such as airports and toll roads) are the most sensitive to economic conditions. Ideally, they should be significantly over-weighted in times of strong economic growth but similarly underweighted when a downturn is anticipated.
- Utility type assets (such as electricity transmission poles and wires, renewable alternatives wind and solar) are less sensitive to market conditions with investment returns largely determined by regulation. They provide a degree of downside protection in difficult economic conditions such as rising interest rates and bond yields because allowable investment returns are adjusted upwards in response. They are, however, potentially subject to regulatory risk, for example if price increases are perceived to be politically unacceptable.
- Social assets (such as hospitals) typically involve long term fixed contract payments from governments and are generally not exposed to volume or patronage risk. Like bonds, they have regular annual payments with low volatility. However, again like bonds, their valuations are sensitive to movements in real interest rates. They will hold their value best in an economic downturn, particularly where central banks respond by loosening monetary policy.