InstarAGF Asset Management NOVEMBER 12, 2014 Journey of an Asset Class Gregory J. Smith President and CEO
Canada as an Infrastructure Leader 2
Infrastructure as an Asset Class 60% Percentage of global institutional investors estimated to have separate allocations for infrastructure 3
Need for Infrastructure Investment Estimates of needed infrastructure investments, 2013 2030 $ trillion, constant 2010 dollars Source: McKinsey Global Institute, Infrastructure productivity: How to save $1 trillion a year,, McKinsey Infrastructure Practice, 2013. 4
Journey of an Asset Class Has infrastructure delivered on its promise? Why it s distinct How it s performed How it s evolving Where the opportunities are 5
Infrastructure as a Distinct Asset Class Investors Intentions for Infrastructure Allocations over Long Term 16% Increase Allocation 46% Maintain Allocation 38% Decrease Allocation Source: 2014 Preqin Global Infrastructure Report, Preqin Investor Interviews, December 2013. 6
Infrastructure as a Distinct Asset Class Strong barriers to entry Resilience to economic fluctuations Stable, long-duration cash flows Low correlation to other asset classes 7
Infrastructure Performance Has generally measured up to expectations 8
Infrastructure Performance Growth of a Dollar, 2003-2011 Source: Marquette Associates, Infrastructure Position Paper, 2011. 9
Infrastructure Performance Risk & Return Analysis (common period March 2003 June 2011) Source: Marquette Associates, Infrastructure Position Paper, 2011. 10
Infrastructure Performance Correlation Matrix (common period March 2003 June 2011) Source: Marquette Associates, Infrastructure Position Paper, 2011. 11
Infrastructure Performance Diversification benefits Improves return per unit of risk Enhances overall efficiency of portfolio 12
Infrastructure Performance Median Net IRRs and Quartile Boundaries of Unlisted Infrastructure Funds by Vintage Year Source: Preqin, Preqin Infrastructure Online, 2014 Preqin Global Infrastructure Report. 13
A Diverse Asset Class Risk/Return Profile for Infrastructure Strategies Greenfield emerging markets Expected Return Mature emerging markets Brownfield developed markets Greenfield developed markets Mature developed markets Risk Social Toll Roads Utilities Airports/Ports Communications Asset Type Source: Russell Investments 14
Structure and Setting Key to investment returns Structure Setting Maturity of asset Diversification Demand & supply dynamics Contractual framework Regulatory environment Political landscape Legal framework Geographic location 15
Growing Allocations to Infrastructure Asset Allocation of Canadian Pension Funds F i g u re 1 : A s s e t A l l o c a t i o n o f C a n a d i a n P e n s i o n F u n d s 100 100 90 90 80 80 70 70 60 60 50 Present Percent 50 40 40 30 30 20 20 10 10 0 0 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2011 2012 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2011 2012 Year Public Equity Public Equity Private Equity Equity Fixed Income Real Estate Infrastructure Other Source: PIAC (2013 ) Source: Inderst, Georg. Pension Fund Investment in Infrastructure: Lessons from Australia and Canada." Rotman International Journal of Pension Management. 7.1 (2014): 43. 16
The Value of Expertise Set clear objectives Know your risk tolerance Know your category, asset lifecycle & jurisdiction 17
An Evolving Asset Class: Toll Roads 18
An Evolving Asset Class: Wind Power 19
The Social Imperative 20
Opportunities for Investors Partner attributes Clear strategy & flexible mandate Focus on the mid-market Operational skill Alignment & strong governance 21
Investment Opportunities: Power Power and gas utilities, oil and gas, and transportation have accounted for: 75% of private infrastructure investment 22
Investment Opportunities: Transportation Estimates for the next 40 years from the International Energy Agency put global passenger and freight travel at 2x 2010 levels 23
Investment Opportunities: Water In Canada, it is estimated that some municipal water systems lose up to 35% to 50% of treated water through leaky, old pipes 24
Journey of an Asset Class CLOSE WITH STRONG PHOTO OF INFRASTRUCTURE MAYBE A ROAD HEADING OFF INTO THE DISTANCE TO FIT WITH THE INFRASTRUCTURE JOURNEY CONCEPT.