Global volatility calls for an active approach to infrastructure investing
In times of global economic volatility, the importance of active management in listed infrastructure becomes particularly apparent.
Last month, the market was forecasting the German 10-year bond yield to slide into negative territory. However, since then the yield has increased fivefold, with most of the euro zone bond yields following suit. This has had a ripple effect on global bond yields in nations including Australia and the US. The sensitivity to raising yields varies greatly across the infrastructure universe. In this type of market where the yield curve is steepening, we expect transportation stocks such as toll roads and airports to outperform other sectors such as utility operators, which have more bond-like proxy characteristics.
Over this same period, oil, gas storage and transportation stocks have rallied strongly, as oil prices have stabilised and even begun to show signs of recovery from the sector weakness inherent in 2014.
Through an active approach to portfolio management, investors can seek to take advantage of these emerging themes with fund managers increasing exposure to sectors that are most likely to benefit, and reducing exposure to sectors that are expected to underperform.
Madeleine Spring, Global Listed Infrastructure, AMP Capital