INTRODUCTION TO INFRASTRUCTURE

Transcription

1 INTRODUCTION TO INFRASTRUCTURE

2 IMPORTANT NOTE AMP Capital Funds Management Limited (ABN , AFSL ) (AMPCFM) is the responsible entity of the AMP Capital Core Infrastructure Fund ARSN (Fund) and the issuer of the units in the Fund. To invest in this Fund, investors will need to obtain the current Product Disclosure Statement (PDS) available from AMP Capital Investors Limited (ABN , AFSL ) (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. None of AMP Capital, AMPCFM, 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 presentation. Past performance is not a reliable indicator of future performance. While every care has been taken in the preparation of this presentation, AMP Capital makes no representation or warranty as to the accuracy or completeness of any statement in it including without limitation, any forecasts. This presentation has been prepared for the purpose of providing general information, without taking account of any particular investor s objectives, financial situation or needs. Investors should, before making any investment decisions, consider the appropriateness of the information in this document, and seek professional advice, having regard to their objectives, financial situation and needs. The Information may contain projections, forecasts, targeted returns, illustrative returns, estimates, objectives, beliefs and similar information (Forward Looking Information). Forward Looking Information is provided for illustrative purposes only and is not intended to serve, and must not be relied upon as a guarantee, an assurance, a prediction or a definitive statement of fact or probability. Actual events and circumstances are difficult or impossible to predict and will differ from assumptions. Many actual circumstances are beyond the control of AMP Capital. Some important factors that could cause actual results to differ materially from those in any Forward Looking Information include changes in domestic and foreign business, market, financial, interest rate, political and legal conditions. There can be no assurance that any particular forward looking information will be realised. The performance of any investment or product may be materially different to the forward looking information. This Information, unless otherwise specified, is current at the date of publication and will not be updated or otherwise revised to reflect information that subsequently becomes available, or circumstances existing or changes occurring after that date. This presentation is solely for the use of the party to whom it is provided and must not be provided to any other person or entity without the prior written consent of AMP Capital. 2

3 WHAT IS INFRASTRUCTURE? 3 Infrastructure assets provide, or facilitate the provision of essential services that support economic growth, generate productivity and underpin the operation of society. SOCIAL REGULATED UTILITIES TRANSPORT COMMUNICATION 3

4 KEY CHARACTERISTICS OF INFRASTRUCTURE Infrastructure assets can offer investors a strongly differentiated set of characteristics which may include: The provision of essential services Significant barriers to entry and a generally dominant market position Long duration assets, often with a life of 30+ years High upfront costs, but low ongoing operational costs Inflation-linked pricing and revenues Generally low return volatility Potential for attractive and predictable income yields from mature assets While infrastructure assets may have some common characteristics, every infrastructure asset is unique and may be subject to its own specific characteristics and risks 4

5 Risks over INDIVIDUAL ASSET CHARACTERISTICS MATTER Characteristics, and risks, vary depending on asset lifecycle stage Mature assets fully operational assets, low risk, predominately income returns Development assets existing assets undergoing enhancements, medium risk, capital and income return Greenfields assets new projects for construction, high risk but potentially high capital returns Stability of cash flow is directly correlated with asset maturity Greenfield assets Development assets Mature assets asset lifecycle Value of asset Development Design & Construction Ramp-up Patronage Operating low yield, high capital growth high yield, GDP capital growth Source: AMP Capital. For illustrativ e purposes only 5

6 CASE STUDY MELBOURNE AIRPORT WHERE WE CREATED VALUE: New approach to traffic forecasting Car parking performance optimisation Capital structure and financing strategy Optimisation of retail offering WHERE WE SEE FURTHER VALUE Continued passenger growth, particularly in the international segment Continued enhancement of car parking offering Property development (enormous developable land bank) SOURCE: AMP CAPITAL 6

7 WHAT CAN INFRASTRUCTURE OFFER SMSF INVESTORS?

8 WHAT CAN INFRASTRUCTURE OFFER SMSF INVESTORS? STEADY RETURNS THROUGH MARKET CYCLES, WITH LOWER VOLATILITY STABLE LONG-TERM YIELDS DIVERSIFICATION Essential services assets Monopolistic characteristics Secure and predictable revenues Inflation linkage Reduction in overall portfolio risk 8

9 CASE STUDY ANGEL TRAINS WHERE WE CREATED VALUE: Management incentive and retention plan Major refinancing initiative Improving operational performance Revenue and EBITDA increasing Change from run-off business to going concern WHERE WE SEE FURTHER VALUE Significant growth opportunities Strong growth in UK passenger train traffic Drive value through extending life of existing fleets New build opportunities SOURCE: AMP CAPITAL 9

10 CAN WE GET ANY IDEAS FROM INSTITUTIONAL INVESTORS? Institutional investors are: Operating in the same environment Facing a similar question.how do you make good long term investment decisions in the face of: Low growth and high volatility in listed equities markets; and Low interest rates So what are institutional investors doing? Rapidly moving away from traditional asset allocations (listed equities and bonds) and increasingly investing in infrastructure INVESTORS EXPECTED CAPITAL COMMITMENTS TO INFRASTRUCTURE FUNDS IN 2016 COMPARED TO 2015 INVESTORS INTENTIONS FOR THEIR INFRASTRUCTURE ALLOCATIONS OVER THE LONGER TERM 9% 26% More capital in 2016 than % 48% Same amount of capital in 2016 as in 2015 Less capital in 2016 than in % 52% Increase allocation Maintain allocation Decrease allocation Source: 2016 Preqin Global Inf rastructure Report 10

11 ACCESSING INFRASTRUCTURE ASSETS Investors can invest in unlisted (or direct) infrastructure assets, or in listed infrastructure securities Same types of underlying assets Each approach has its own differentiating characteristics and can bring its own benefits Major benefits of Listed Infrastructure Major benefits of Unlisted Infrastructure Diversification and liquidity Stability of valuation (or low volatility) and control COMPARISON OF RISK Listed Direct Geographic Diversity High Low Asset Diversity High Low Liquidity High Low Daily Valuations Yes No Control Low High Volatility of valuation High Low Transaction cost Low High Portfolio Turnover High Low Investment horizon Medium term (~5 years) Long term (~10 years) SOURCE: AMP CAPITAL 11

12 INFRASTRUCTURE PERFORMANCE AND OUTLOOK

13 INFRASTRUCTURE PERFORMANCE Infrastructure can provide relatively steady returns though volatile periods Data below shows that AMP Capital Core Infrastructure Fund has delivered consistent long term performance, including a cash yield of 6.05% p.a. since inception. Performance of Core Infrastructure Fund (total return after fees) Inception (p.a.) 5 years (p.a.) 3 years (p.a.) 1 year Benchmark 7.54% CIF 7.96% Benchmark 6.73% CIF 11.32% Benchmark 6.51% CIF 11.47% Benchmark 6.00% CIF 13.18% Past performance is not a reliable indicator of future performance. Source: AMP Capital. The chart shows the performance of Class H units to 30 April CIF performance results are annualised, before investor-level tax, after Class H fees and expenses, and assume distributions are reinvested. Fund inception: The Fund s benchmark is the 10 year Australian Government Bond Yield plus 3.25% p.a. 13

14 INVESTMENT PERFORMANCE Infrastructure may provide attractive returns with significantly lower volatility than listed equities Over the five years to 31 March 2016, the AMP Capital Core Infrastructure Fund has delivered: 202% of the return of Australian equities with 39% of the volatility 104% of the return of global equities with 41% of the volatility Past performance is not a reliable indicator of future performance. Source: AMP Capital. The chart shows the performance of CIF Class H units to 31 March 2016 compared to the performance of broadly-based Australian and Global equities indices. CIF performance results are annualised, before investor-level tax, after Class H fees and expenses, and assume distributions are reinvested. Fund inception: The Fund s benchmark is the 10 year Australian Government Bond Yield plus 3.25% p.a. 14

15 2016 OUTLOOK 2016 outlook broadly supportive Expecting ok (though uneven) global growth Low inflation Easy monetary conditions U.S. likely to raise rates gradually, other countries including Australia remain biased to further easing Tapering of quantitative easing and other liquidity support Timing and extent of U.S. rate hikes Continued uncertainty over Chinese growth Geopolitical risks Likely to be continued volatility We expect ongoing reasonable returns from infrastructure Availability and regulated infrastructure assets to provide stable returns Improving cash flows will be reflected into valuations of growth-linked infrastructure assets 15

16 INFRASTRUCTURE RISKS

17 SOME OF THE INVESTMENT RISKS WHEN INVESTING IN INFRASTRUCTURE Every infrastructure asset is different and will have it s own specific risks Risk identification, mitigation and management is crucial for any infrastructure asset Some common risks that apply to many infrastructure assets include: Dealflow and pricing Interest rate sensitivity and refinancing risk Lack of liquidity Regulatory and political risk Operating risk 17 17

18 HOW TO INVEST YOU CAN NOW INVEST ONLINE IN LESS THAN 5 MINUTES* No printing required ampcapital.com.au/smsf-suite/ invest-online-now Start to finish in 5 mins* Multiple investments in one application Online ID verification *Investing online takes on average less than five minutes for an individual investor. Other types of investors can experience longer times. 18

19 QUESTIONS? Join our live Q&A on the SMSF Community now with John and Tim at

20 APPENDIX - AMP CAPITAL CORE INFRASTRUCTURE FUND

21 CORE INFRASTRUCTURE FUND OVERVIEW > AMP Capital Core Infrastructure Fund ( CIF or the Fund ) is designed to give investors exposure to the defensive characteristics of infrastructure businesses and aims to provide: Equity-like returns with lower levels of volatility An attractive cash yield Access to high quality direct infrastructure assets that are usually only accessible to very large institutional investors Liquidity through the payment of withdrawals within 10 business days > The Fund does this through investing in: Direct infrastructure assets alongside other AMP Capital managed funds; and A portfolio of listed infrastructure securities which has been designed to provide liquidity with a low volatility outcome > We take an integrated approach to building a portfolio of direct businesses and listed securities with the objective of: Obtaining direct investment characteristics Controlling volatility across a narrow range Being well diversified by factor, sector and geography Accessing two sources of return Providing liquidity PORTFOLIO TARGETS > Total return exceeding investment objective of the Australian 10 year bond yield plus 3.25% per annum > Yield of 5% per annum (in local currency terms) > Volatility less than 10% > Target allocation is 50% direct / 50% listed securities + cash > Diversified by sector and geography > Diversified by factor exposure: GDP Inflation Interest rates > No portfolio borrowing 2016 INFRASTRUCTURE ROADSHOW 21

22 AMP CAPITAL CORE INFRASTRUCTURE FUND DIRECT ASSETS Investment Powerco Australia Pacific Airports Corporation CLH Angel Trains SA Schools Powerco is New Zealand's largest electricity and gas distribution company, with a 37,058 kilometre network across the upper central and lower central areas of New Zealand s North Island Powerco services over 425,000 connections (around 325,000 electricity and over 100,000 gas connections) Represents 16% of the total electricity connections and 40% of the total gas connections in New Zealand Significant opportunity for further growth in the business Australia Pacific Airports Corporation (APAC) owns 100% of Melbourne and 90% of Launceston airports under 50 - year, long term leases from the Federal Government, with an option for another 49 years Melbourne Airport serves over 32 million domestic and international passengers p.a. and is the 2 nd largest airport in Australia Launceston Airport serves over 1 million domestic passengers p.a. and is the 2 nd largest airport in Tasmania Compania Logistica de Hidrocarburos holds a dominant position in the pipeline transportation of refined petroleum products in Spain and owns over 60% of total refined oil product storage in the country The CLH network comprises over 4,000 kilometres of pipeline linking major refineries to main wholesale distribution points, and 38 storage facilities, comprising over seven million cubic metres of storage capacity Angel Trains is the largest of three UK rolling stock companies with a fleet of over 4,500 vehicles and approximately 35% of the UK passenger rolling stock market Leases its rolling stock to all nineteen UK franchised train operating companies (TOCs), two open access train operators and one freight operating company under long term leases Angel Trains has no exposure to passenger volume risk, as customers pay monthly availability rents even if the rolling stock is not in service or not operational SA Schools Public Private Partnership comprises six new super school facilities in the greater Adelaide region in South Australia with an operational capacity of over 4,600 pre-school, primary, secondary and child care places Revenue comprises availability-based fixed amounts from the SA State Government AquaTower AquaTower owns and operates four water treatment plans in four regional towns in Victoria AquaTower has exclusive rights to deliver potable water to Ararat, Great Western, Halls Gap and Stawell until December 2026 The company s water treatment plants commenced operations in 2002 and currently processes circa 2,600 ML p.a. of water which serves approximately 13,000 water users in the district Port Hedland International Airport Port Hedland International Airport is located in Western Australia on the Pilbara coast, and is the gateway to the world s largest iron ore export port Port Hedland International Airport is the 19th busiest airport in Australia with ~70 flights per week 22

23 KEY RISKS The key risks of investing in the Fund include or are associated with: > Liquidity the Fund is expected to provide investors with a higher level of liquidity than is generally associated with unlisted infrastructure assets through its blend of unlisted infrastructure assets and listed infrastructure securities. We aim to pay withdrawals within 10 business days, however due to the liquidity characteristics of unlisted infrastructure assets we may take up to 365 days or longer to pay, and our ability to meet withdrawals is dependent on the Fund remaining liquid for Corporations Act purposes. If we are unable to meet all withdrawal requests within 10 days, the withdrawal provisions may be varied such that withdrawals are processed monthly, and in these circumstances withdrawal amounts may be reduced on a pro-rata basis for all withdrawal requests. Please refer to the Fund s PDS for details > Share market investments the risk of capital loss exists, especially over the shorter term > International investments including losses related to currency exchange rates, hedging, and changes in the state of the Australian and world economies > Gearing increases in interest rates may affect the cost of borrowings in underlying assets and so reduce their returns Risks of investing specific to the Fund may also include or be associated with: > Currency exchange rates > Deal flow > Infrastructure investments > Infrastructure and utility market regulation > Co-ownership, and > Derivatives YOU SHOULD READ THE IMPORTANT INFORMATION ABOUT FEES AND COSTS BEFORE MAKING A DECISION Go to the Fund page on u to view the PDS and Incorporated Information documents. The material relating to fees and costs may change between the time when you read this PDS and the day when your client acquires the product. 23