THE BLACKROCK INFRASTRUCTURE EQUITY STRATEGY INTELLIGENT BY DESIGN

Transcription

1 THE BLACKROCK INFRASTRUCTURE EQUITY STRATEGY INTELLIGENT BY DESIGN

2 the equity infrastructure strategy WHY INFRASTRUCTURE? Infrastructure is one of the world s fastest growing sectors. It includes fundamental services and facilities, such as transportation, communication and utilities, which are necessary for the growth and development of every economy. So what exactly is driving infrastructure growth? Demographic changes have resulted in the need to build new and expand existing communication, transportation and utility networks. At the same time, increased privatisation of public utilities and growth of Public-Private Partnerships have improved the sector s effi ciency and expanded the investable universe. FACTBOX: In a report published by the Organization for Economic Cooperation and Development in May 2007, it was estimated that the world needs to spend 2.5% of GDP on communication, roads, rails, electrical transmission and distribution of water. This need is by no means restricted to the developing world: the American Society of Civil Engineers estimated in their 2005 Report Card for America s Infrastructure that the U.S. needs to spend $1.6 trillion over the next 5 years updating its infrastructure to a good condition. Events like the Minnesota bridge collapse in August 2007 highlight the need to expedite these necessary infrastructure projects. Whatever the factors driving current momentum for this sector, infrastructure can be an attractive addition to a diversifi ed portfolio. Infrastructure investments can provide stable cash fl ows and low volatility relative to broader equity portfolios. INVESTMENT OPPORTUNITIES IN INFRASTRUCTURE Existing ways to access the infrastructure sector may not be optimal: Many infrastructure indices and exchange traded funds tend to include unregulated utilities that behave more like conventional stocks. They therefore do not provide pure exposure to the sector and may, for example, generate volatile cash fl ows. At the other extreme, private infrastructure funds, who look to outperform the broader sector, are illiquid and many are currently over funded. As private funds compete for limited assets, generating alpha becomes more diffi cult. BlackRock, one of the world s leading global asset managers, has created a unique infrastructure strategy, driven by the potential that they see for infrastructure. The BlackRock Infrastructure Equity Strategy aims to isolate genuine infrastructure assets, to provide a pure view of the sector. The strategy targets stable returns of cash + 5% (returns are not guaranteed). This strategy was developed by BlackRock for use within its institutional portfolios and is now being made available for broader distribution through Morgan Stanley IQ.

3 A UNIQUE OPPORTUNITY FROM A LEADING INVESTMENT TEAM Through Morgan Stanley IQ, BlackRock delivers its investment expertise in a unique strategy that targets the infrastructure sector. The BlackRock Infrastructure Equity Strategy offers a new opportunity, combining access to a diverse, fast-growing sector with the investment expertise of this leading global asset manager. Morgan Stanley IQ is a cross-asset class structured products platform that creates new and innovative investment products designed for broad distribution. Backed by strengths in research, sales and trading, Morgan Stanley IQ puts both market knowledge and a robust infrastructure at your disposal. With $1.2 trillion total assets under management and approximately 5,000 employees in 18 countries, BlackRock is one of the world s largest asset managers. During its 19-year history, BlackRock has attracted a large client base, ranging from major institutions and insurance companies through to charities and private clients worldwide. Their Multi-Asset Portfolio Strategies (MAPS) team are a specialist team within BlackRock, responsible for developing, assembling and managing investment solutions involving multiple strategies and asset classes. MAPS has developed the Infrastructure Equity Strategy to gain pure exposure to infrastructure as a core part of their asset allocation model for institutional portfolios. Morgan Stanley IQ clients can now also access this strategy through a range of structured products, from tracker certifi cates to capital protected performance notes. Further details of these products can be found on our website, at:

4 the stock selection methodology BLACKROCK S FOUR-STAGE SELECTION PROCESS SEEKS TO IDENTIFY STOCKS WITHIN THE INFRASTRUCTURE SECTOR WITH HIGH DIVIDEND YIELD AND POTENTIAL ACQUISITION CANDIDATES DEFINE SELECTION UNIVERSE S&P/Citigroup Broad Market Index (BMI) Global constituents, both funds and equities, fi ltered for companies whose primary business is infrastructure, regulated utilities or related industries, with a market capitalisation of more than $250 million. REFINE SELECTION UNIVERSE The universe is refi ned to approximately 100 securities, focusing on: Regulated utilities, to reduce commodity risk and provide infl ation linkage (remove merchant power companies) Developed markets with political stability and transparent regulatory regimes APPLY BLACKROCK PREFERENCE FUNCTION The BlackRock Preference Function represents the degree of conviction that the asset fi ts BlackRock s view on the sector. It aims to identify securities with: Strong Price Momentum Attractive Valuation Cash Generation Under Leveraged FINAL SELECTION BlackRock selects between 20 and 60 securities with the highest BlackRock Preference Functions, subject to concentration limits. The index is dynamic, calculated in both USD and EUR and monitored on a quarterly basis.

5 a new way to access infrastructure The BlackRock Infrastructure Equity Strategy is a brand new investment opportunity to access the infrastructure sector. It aims to isolate genuine infrastructure assets: Infrastructure Basket Exposure by Geographic Region Excludes unregulated utilities in the portfolio as these could generate commodity risk and unpredictable cash fl ows Identifi es assets which have historically displayed predictable earnings and cash flows, controlled by regulation or long term concession agreements Currently focuses on developed markets that have political stability, transparent regulatory regimes and a clear rule of law The result is a diverse portfolio of listed infrastructure securities and funds, where component weights are set by BlackRock methodology, not capped by geography or sub-sector. BLACKROCK INFRASTRUCTURE EQUITY STRATEGY FACTS INDEX EUROPE - 49% NORTH AMERICA - 29% AUSTRALIA & NEW ZEALAND - 15% ASIA - 7% Source: BlackRock, August 2007 Start Date: 15th March 2007 Number of Components: 20-60, currently 40 Currency: Both EUR and USD available Sponsor: Morgan Stanley Infrastructure Basket Exposure by Sub-Sector Daily levels calculated and published by Standard & Poor s. KEY INVESTMENT ADVANTAGES: Broad infrastructure exposure, with focus on stable returns from regulated utilities and developed markets Access to the investment expertise of BlackRock, and their Multi- Asset Portfolio Strategies team KEY INVESTMENT CONSIDERATIONS: Growth potential of infrastructure sector may not be realised The BlackRock Infrastructure Equity Strategy may not refl ect the performance of the infrastructure sector as a whole INDEX UTILITIES - 40% TOLL ROADS - 28% AIRPORTS - 13% DIVERSIFIED - 8% WATER - 5% PORTS - 4% COMMUNICATION - 2% Source: BlackRock, August 2007

6 IMPORTANT INFORMATION This information has been prepared solely for information purposes and is not an offer to buy or sell or a solicitation of an offer to buy or sell any security or instrument or to participate in any particular trading strategy. This information is confi dential and is solely for your internal use. This information is based on or derived from information generally available to the public from sources believed to be reliable. No representation or warranty can be given with respect to the accuracy or completeness of the information, or with respect to the terms of any future offer of transactions conforming to the terms hereof. We do not undertake to update this information. Certain assumptions may have been made in the analysis that resulted in any information and returns/results detailed herein. No representation is made that any results/returns indicated would be achieved or that all assumptions in achieving these returns have been considered or stated. Changes to the assumptions may have a material impact on any results/returns detailed. Morgan Stanley, Blackrock and their respective affi liates disclaim any and all liability relating to this information, including without limitation any express or implied representations or warranties for statements contained in, and omissions from, this information. Additional information is available on request. Morgan Stanley, Blackrock and and their respective affi liates may deal as principal in or own or act as market maker for securities and instruments mentioned herein or of issuers mentioned herein and may also advise or seek to advise issuers of such securities and instruments or engage in transactions for clients on a discretionary basis with respect to such securities and issuers. 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This presentation is for use only with fi nancial professionals, investment advisers, broker-dealers, institutions or individuals that do not meet the defi nition of U.S. Person within the meaning of Rule 902(k) of Regulation S promulgated under the U.S. Securities Act of 1933, as amended (the Securities Act ). This presentation does not, and is not intended to, constitute directed selling efforts in the United States within the meaning of Rule 902 of Regulation S. This presentation contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act. Such statements can be identifi ed by the use of forward-looking terminology such as may, will, should, expect, anticipate, project, estimate, intend, continue, target, believe, the negatives thereof, other variations thereon or comparable terminology. Due to various risks and uncertainties associated with investments in the infrastructure sector and the broad equity markets, actual events or results or the actual performance of any security or instrument linked to the value of the BlackRock Infrastructure Strategy may differ materially from those refl ected or contemplated in such forward-looking statements BlackRock, Inc. All Rights Reserved. BLACKROCK is a trademark of BlackRock, Inc. Copyright 2007 Morgan Stanley. All rights reserved. MORGAN STANLEY & CO INTERNATIONAL PLC 25 CABOT SQUARE CANARY WHARF LONDON E14 4QA TEL: +44 (0) FAX: +44 (0) INFO@MORGANSTANLEYIQ.COM 18 October This brochure has been printed using paper from socially and environmentally sustainable sources.