Colonial Global Infrastructure Fund Sees 10% Returns After Beating Peers
Colonial First State Global Asset Management Ltd.’s infrastructure fund expects returns of about 10 percent this year after it beat the industry benchmark in 2011, according to its manager.
“The fund performed very well last year because of the underlying quality of the sector and our active management of the portfolio, while some takeover activity certainly helped,” Peter Meany, the head of global listed infrastructure at Colonial, who manages over A$1 billion ($1 billion), said in an interview in Sydney. “We expect more of the same this year.”
Colonial’s infrastructure fund, which invests in listed utilities, toll roads, mobile towers, and oil pipeline and storage companies in areas including the U.S., Europe and Australia, had a total return of 8.6 percent before fees in 2011, according to a report from the company. That compared with the industry benchmark, which returned 4.7 percent.
This year, the fund will focus on companies that offer inflation-protected income and steady capital growth, particularly those whose prices are already reflecting “worst- case scenarios,” such as Italy’s Atlantia SpA (ATL), Germany’s E.ON AG (EOAN) and France’s GDF Suez (GSZ) and Vinci SA (DG), Meany said. It will also invest in companies located in developed countries with exposure to emerging markets, such as Rotterdam-based Koninklijke Vopak NV (VPK), and Melbourne-based Asciano Ltd. (AIO), he said.
Asciano, Atlantia and Melbourne-based Transurban Ltd. (TCL) are of interest, also because their valuations, assets and structures may make them attractive as takeover targets this year, Meany said.
Takeovers
Global pension funds will probably target companies in the U.S., U.K., Australia and Canada, where there are fewer restrictions on such buyouts, Meany said. In Europe and emerging markets, takeovers will more likely come from groups led by shareholders who already own a significant portion of the company, he said.
“Many pension funds are below target allocations to infrastructure, which are scarce assets by nature,” according to Meany. “So the only way to get to that target allocation is to be involved in takeovers of the assets that are available, and the reality is that’s in the listed market.”
Takeovers by pension funds over the past two years have included two purchases by the California Public Employees Retirement System of a power cable and London’s Gatwick Airport; and Australian infrastructure group Intoll Group by the Canada Pension Plan Investment Board.
The California pension has said it plans to spend as much as $5 billion on infrastructure in the next three years. The U.K. started a 30 billion-pound ($46 billion) program to attract investment from pension funds to finance the construction of roads, railways and other infrastructure projects.
“There’s been a massive underinvestment by governments in infrastructure,” Meany said. “The private sector is being called on more and more to be involved in funding those projects.”
To contact the reporter on this story: Nichola Saminather in Sydney at Nsaminather1@bloomberg.net
To contact the editor responsible for this story: Andreea Papuc at apapuc1@bloomberg.net
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