Diversification through global infrastructure

Funds Management

by Carolyn Herbert

Transcription of Finance News Network Interview with Redpoint Investment Management Senior Portfolio Manager, Alex Stephen
Lelde Smits: Hello I’m Lelde Smits for the Finance News Network and joining me from Redpoint Investment Management is Senior Portfolio Manager, Alex Stephen. Alex welcome back to FNN.
Alex Stephen: Thanks Lelde, great to be back.
Lelde Smits: Your Fund is focused on global infrastructure, an asset class we’re increasingly hearing more about as we’re urged to diversify. How has the asset class performed over the last couple of years and why do you believe investors should include global infrastructure in their portfolios?
Alex Stephen: The asset class has performed extremely well over the last four years; it’s up over 100 per cent. That’s hedged into Australian dollar terms, so it’s a great performance, very much in line with global equities. And infrastructure is a very important asset class; it has a long-term stable view. So it really mirrors a lot of what pension fund investors are looking for, in their portfolios. So it has a stable dividend return, it has less volatile price returns and we believe it’s a very exciting opportunity for investors.
Lelde Smits: What do you believe makes global infrastructure assets more compelling than local infrastructure assets?
Alex Stephen: We hold local infrastructure assets in our portfolio, but they’re only a small percentage. So it’s five per cent of our portfolio in total, there’re only six companies that we invest in in Australia. So really by adding the rest of the world into our investment universe, you’re giving it a lot bigger diversification and the ability to pick up a lot more opportunities overseas. So for us, a very very important part of the investment process is looking across the world and finding those opportunities.
Lelde Smits: For investors not familiar with Redpoint Investment Management, what is your track record in this asset class?
Alex Stephen: Redpoint has been in existence for nearly four years now and infrastructure was our first product launched, and that’s over three years ago. So we have a three-year track record and it’s performed very well. It’s beaten its benchmark by 50 basis points, 0.5 per cent. And that’s up over 15.5 per cent on an annualised basis per year, so we’ve done well.
Lelde Smits: The last months have been quite volatile in regards to Greece’s debt situation, and more recently China’s volatile stock market. What impact do you believe these kinds of shocks are having on global infrastructure stocks?
Alex Stephen: The infrastructure stocks are not immune to falls in the equity market. They are listed equities afterall. However, we believe that they are less volatile and more of a defensive asset, than a pure equity is. So they have sort of a bond like exposure as well, they have a long-term maturity dated nature. And as a result, we expect them to fall less than the global market when there are tough times.
Lelde Smits: Last time we spoke, the Fund had just acquired some positions in airports from New Zealand to Paris and Zurich. How have these been performing?

Alex Stephen: Overall very well. If I start with the less well performer, the French/Paris airport is down 3.5 per cent, but that’s in line with the global equity market. The other two, Auckland International and Zurich airport are up strongly. So Auckland International’s up 10 per cent and Zurich’s up five per cent. The other one I wanted to mention actually as well is Sydney airport, which is up as well since we bought it in April. That’s 3.5 per cent up. So they’ve all bucked the trend of the global equity market in that timeframe.
Lelde Smits: Finally Alex, what macro factors will you be keeping an eye out on over the coming months?
Alex Stephen: There’s still an issue around Greece clearly, but hopefully that will be resolved within the next week or two. China seems to be resolving itself as well. However, there’s still uncertainty as to whether the local market will recover fully. But the other real issue for us is interest rates and Janet Yellen, the head of the US Federal Reserve, has reiterated her position that US rates will increase later in the year. And we believe the Fund is well positioned to take advantage of a rising interest rate environment. So we look forward to the first interest rate moves in the US and hopefully, across the globe after that.
Lelde Smits: Alex Stephen, thank you for the update from Redpoint Investment Management.
Alex Stephen: Thank you very much.