New Global Infrastructure Index Announced

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The world's infrastructure sector is getting its own investment tracking index.

This week MSCI announced the IPD Global Infrastructure Direct Asset Index, describing the investment performance of infrastructure investments irrespective of the investment vehicle structure.

The index database is comprised of 132 investments around the globe with an enterprise value of USD $49 billion and represents a significant milestone for the infrastructure sector as it provides a robust measure of return performance that can be compared with competing asset classes and used to benchmark performance across investments.

The geographical profile of the Index has large investment exposures in Australia (44%) and Continental Europe-UK (43%) with smaller exposure in North America (8%).

The current sector exposure of the Index is weighted towards the transport, power and water sector streams with shares of 47%, 24% and 22% respectively.

The Index returns are calculated in local currency to purge exchange rate effects. Results show that investment in a pool of underlying infrastructure investments delivered an annualized return of 14.7% as at June 2014. This investment was comprised of 4.0% income return and 10.4% capital return. This compares favorably to the average annualized return over the last five years of 13.4%.

Annual return performance across sector streams was found to be strong. As at June 2014, annual total return for global transport stood at 16.8% while return for power stood at 18.3%.

Return performance also differs more noticeably by investment style. Over the last five years to June 2014, low risk investments delivered an annualized return of 14.0%, moderate risk investments delivered an annualized return of 13.9% and high risk investment delivered an annualized return of 5.2%.

Overall leverage for the infrastructure sector stood at 52%. However, this was found to vary markedly across sectors and asset types. Leverage for contracted assets was higher at 57% while leverage for un-contracted assets was lower at 48%. 

Anthony De Francesco, Executive Director and Head of IPD Infrastructure Products said, "The IPD Global Infrastructure Asset Index is a significant information tool for the infrastructure asset class as it will aid the sector in the areas of investment market cycles and trends, asset pricing, benchmarking analysis, attribution analysis and risk modelling.

"The Index is deemed important as its release coincides with a period of increased demand for investment return transparency from the global investment community as global asset owners are seeking to increase asset allocation to infrastructure."

Peter Hobbs, Managing Director and Head of IPD Research said, "This is a major achievement and an important step for the industry.  Infrastructure has long since been a favored asset class for many Australian and Canadian investors, and there is a broadening of interest from many other investors globally.  A critical requirement for these investors is objective data and insight into the performance and risk of the asset class, and the IPD Global Infrastructure Index represents a major step in the right direction."

The Index has developed from the IPD Australia Infrastructure Fund Index which was launched in November 2012, representing investment performance of unlisted infrastructure funds and mandates that are domiciled in Australia.

The IPD Global Infrastructure Direct Asset Index is considered a 'consultative index' as it is expected to grow significantly in terms of constituents and investments over the next 12 months. The Index will ultimately allow for a segmentation of performance by sector, asset stage, asset type, asset use, investment style and geography and as such, will provide an information tool which reflects the diversity of the asset class.