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Infrastructure investment delivers in times of crisis

Anne Copeland, Head of Specialist Funds, Real Asset Equity, Aegon Asset Management

Infrastructure investment has proven it can deliver in times of crisis, delegates heard at Real Asset Media’s Infrastructure Summit, which was held online recently.

The pandemic has had a negative impact on many sectors, but infrastructure is stable and has a low correlation to the general economic cycle. It also offers a huge range of sectors and segments to invest in, from energy to telecoms to healthcare.

“There is a huge need for social infrastructure investment and the private sector needs to be involved because the state sector is not investing nearly enough,” said Anne Copeland, head of specialist funds, real assets equity, Aegon Asset Management. “Appetite from investors is off the scale and early movers have really benefitted.”

There is increasing demand for renewable assets and social impact investing. The downside is that asset acquisition is becoming more difficult, as more players are entering the market and want a piece of the action.

“We’ve seen change, a globally coordinated effort to restart economies, and much of that is focused on infrastructure, which is good for society,” said Alex Araujo, fund manager, global listed infrastructure, M&G Investments. “A lot of money is being thrown at efforts to rebuild, with a different focus in different regions.”

Healthcare, with a focus on operational businesses, technology and service delivery in the buildings, has been resilient.

 “Healthcare has been a very defensive play,” said Copeland. “Very long leases guarantee long-term income streams. We’ve had 100% payment of all rents throughout the crisis and not many funds can say that.”

Energy transition provides wealth of opportunities

Renewable energy is another growth sector. “We’re in the early stages of the energy transition to hydrogen, carbon capture and storage”, said Richard Abadie, partner, global leader of capital projects and infrastructure group, PwC. “If you take risks now, you will get massive returns in the long term.”

In the energy sector the downturn has been less significant because demand is so high.

“Just think of the energy needs of data centres, of Google, Amazon and so on,” said Jan-Peter Mueller, executive director, head of asset structuring and infrastructure investments, Commerz Real. “What’s important is feeding that huge hunger for energy with green energy.” 

There is a crossover between energy, technology and telecoms.

“We’ve been investing in fibre-optic networks, telecom towers and data centres,” said Araujo. “They are a core part of our portfolio and they’ve done very well this past year, but the winds keep shifting.”

Investors must be nimble and flexible to grab opportunities that arise in other areas.

During the pandemic, in the listed realm, valuations of airports were very attractive, for example, he said. “We invest for the long term but we must exploit opportunities that come up. We like transitional businesses, such a reconfiguring high-voltage networks in Germany to accommodate renewables, or making low-voltage networks smarter. Areas which may not be obvious to people, but are very interesting.”

There is an increasing crossover between infrastructure and real estate.

“The regulatory framework needs to change, as the two sectors merge more and more,” said Thomas Veith, partner, real estate, PwC. “The good news is that it’s not difficult to combine infrastructure investment with a green agenda, without greenwashing.”