@ a glance newsletter

Solid performance marks 3 year anniversary for Core Infrastructure Fund

(November 2010)

Interview with Perry Lucas, Portfolio Manager for AMP Capital Core Infrastructure Fund

Firstly Perry, can you summarise for us the most interesting features of the AMP Capital Core Infrastructure Fund, and why it appeals to investors?

Perry – The real opportunity for investors in the AMP Capital Core Infrastructure Fund (CIF) is the chance to invest in direct infrastructure assets on a global scale. Direct investment in assets like airports, rail and water companies are normally available only to institutional investors. But CIF gives investors the opportunity to benefit from the predictable long term returns of this asset class.

The other important feature of the Fund is its mix of investments between direct and listed infrastructure. This diversification effectively provides two sources of return for investors as each asset class has a different return cycle.

How has the Fund performed since its inception in November 2007?

Perry – Bearing in mind that the Fund was launched just before the GFC we’re really pleased to have been able to record positive returns since inception. Especially pleasing has been the fund performance over the last 12 months where performance has been positive and beaten benchmark.

Why do you think the Fund managed to perform as it has?

Perry - The real strength of the Fund is its diversity and asset allocation between listed and direct assets. So during the global financial crisis when the valuation of direct assets remained strong and we were above our target allocation of 50% we were able to sell off some of our direct holdings and buy into listed shares stock when their prices were low.

The other thing is that, for direct assets, there’s a direct relationship between the quality of cash flow and the valuation of the asset. So even during a market cycle when the listed market is falling the returns from direct assets, such as the returns we saw from Melbourne Airport, remained steady.

So would you say that steady returns are one of the most valuable characteristics of direct assets?

Perry – In terms of attractiveness for investors, yes I think that direct assets do perform well even during volatile times.

The other advantage for investors is that when we invest directly into an infrastructure asset we also take a seat on the board of that company so we have management’s view when we’re predicting returns from that particular asset. We also bring all the knowledge and expertise of AMP Capital as a whole to the strategic direction and operation of that business.

Can you explain the types of assets the Fund invests in directly?

Perry – Well Melbourne Airport, owned by Australia Pacific Airports Corporation (APAC) is one of our key assets. What’s interesting about Melbourne Airport is that it benefits from the growth in Asian economies as well as it’s position domestically, as the Melbourne Sydney route is the 4th densest in the world.,

We also have direct holdings in a Spanish pipeline and storage company called CLH who concentrate on transporting bulk petroleum products across Spain, including delivering fuel to 23 Spanish airports. Again the returns from CLH remained positive in spite of the volatility in the Spanish economy.

I think both companies illustrate why a Fund like CIF can really form an important part of any investors portfolio.

Going forward where do you see the opportunities in infrastructure?

Perry - The outlook for infrastructure is really positive as governments in developed countries continue to look at ways to fund infrastructure renewal while in emerging markets the push for infrastructure development is driving their economic growth.

Both situations provide opportunities for specialist investors, like AMP Capital, to take a stake in projects that will offer stable long term returns and capital growth and create diversified portfolios for investors.

Find out more about the AMP Capital Core Infrastructure Fund.

AMP Capital Investors Limited “AMP Capital” (ABN 59 001 777 591, AFSL 232 497), is the responsible entity of the AMP Capital Core Infrastructure Fund an the issuer of the units in the Fund. To invest in this Fund, investors will need to obtain the current Product Disclosure Statement (“PDS”) from AMP Capital. The PDS contains important information about investing in the Fund and it is important that investors read the PDS before making a decision about whether to acquire, or continue to hold or dispose of units in the Fund. Neither AMP Capital, nor any other company in the AMP Group guarantees the repayment of capital or the performance of any product or any particular rate of return referred to in this article.