The Global Listed Infrastructure Organisation

Register for Sydney, book 1x1s, plus AUM up in 2022
Hello,

Welcome to the February round-up of GLIO Index stats and GLIO member news.

You can take advantage of the latest research from CBRE Investment Management, Cohen & Steers, and Spek Advisory, which you can download by scrolling down this mail. The research looks at how listed infrastructure can help investors meet their target allocations to the asset class. The research further backs our findings that listed infrastructure should be considered complementary to private infrastructure investment. Put simply, mid-to-long-term performance is very similar, plus correlations between listed and private infrastructure increase over longer investment horizons.

We are finalizing our updated assets under management (AUM) chart (on the right below) for the 55 investment managers offering clients a dedicated listed infrastructure option. Based on individual feedback from managers, we estimate that collective AUM grew to approximately $155bn, up from $145bn in 2021. This is an excellent example of our success in raising awareness of listed infrastructure's investment benefits.

You can still watch the recordings from the GLIO/National Grid London seminar held on January 25 below. Please scroll down this mail for National Grid CEO John Pettigrew's interview with Jim Wright, Premier Miton and panel discussions on infrastructure allocations and ESG in investment making.

If you haven't already, please take a look at the latest issue of the GLIO Journal. It's packed full of insightful opinion pieces from the GLIO membership. Click on the image to the right, or scroll down for a snapshot of each article. Since we published last month, the journal has been viewed over 2,400 times - they are great numbers.

If you'd like a hard copy/printed version of the GLIO Journal, please email me, and we'll get a copy in the post.
Watch out for the results of the bi-annual GLIO Index review published after trading on March 1.

Don't forget that investors can book 1x1s calls/video calls with GLIO corporate members using the 1x1s platform by scrolling down this mail. It is a great opportunity to catch up with corporates following their results announcements in February.

Finally, for those of you attending the GLIO/Morgan Stanley investor event on March 16 - see you there!

Kind Regards,
Fraser Hughes
GLIO Chief Executive
GLIO Index - February 28, 2023
The chart above shows the GLIO Index (Blue) v the high, low, and mid-range of private infrastructure benchmarks (Red). The GLIO Index tracks the private infra mid-point closely. Global equities lag over the long-term (Green).
  
The 20-year annualized USD return for the GLIO Index is +10.9%, ahead of global equities (+9.3%) and with a full 280bps lower volatility.

Click on the button to the right for the full set of asset class annualized total returns over short, medium, and long-term investment horizons.
 
Click the button to the right to see 10, 15, and 20-year risk/return profiles. All three listed infrastructure indices offer better risk/return profiles than global equities and global REITs.
GLIO Index: Key stats
March 16: Sydney - Register Now!
Where:
Morgan Stanley, Level 26
2 Chifley Tower, Chifley Square, Sydney

When:
March 16, 2023,

Doors open:
1:45 PM
Agenda:

Welcome: Rob Koh, Morgan Stanley

GLIO Update: Fraser Hughes, GLIO

Infrastructure Allocations discussion, moderated by Lucas Driver, Frontier Advisors, with:
  • Sarah Shaw, 4D Infrastructure
  • Charles Hamieh, ClearBridge
  • Michael Landman, IFM Infrastructure

Future of Transportation discussion, moderated by Peter Meany, First Sentier Investors, with:
  • Henry Byrne, Transurban
  • Ernesto Lopez Mozo - Ferrovial

Future of ESG Investing discussion, moderated by Justin Ginnivan, CBUS Super, with:
  • Georgia Hall, Maple-Brown Abbott
  • Rebecca Myatt, First Sentier Investors
  • Jonathan Ong, Pollination Group

Future of Energy discussion, moderated by Rob Koh, Morgan Stanley, with:
  • Tim Nelson, Iberdrola Australia
  • Paul Austin, Australian Energy Market Operator
  • Dmitry Danilovich, Acciona Energia
  • Paul Johnston, Ausbil Infrastructure

Economic outlook: Chris Read, Morgan Stanley

The agenda will be followed by a networking reception at 17:45.
GLIO & National Grid London Seminar
On 25 January, GLIO co-hosted an investor seminar with National Grid, focusing on the importance and attractiveness of holding listed infrastructure.

National Grid CEO, John Pettigrew was interviewed by Jim Wright, Premier Miton, and answered panelist questions live, highlighting the critical need for continued investment in National Grid's network assets to enable a fair, clean, and affordable energy transition.
Matthew Brundle, EVORA Global was joined by Georgia Hall, Maple-Brown Abbott, and Guy MacKenzie, Blackrock to discuss how they look at ESG factors in their investment decision-making.
David Bentley, ATLAS Infrastructure, and Thomas Symons, WTW, share their thoughts on the current trends in infrastructure investment. Anish Butani, bfinance, poses the questions, which cover the pros and cons of investing in both listed and unlisted infrastructure.
Member's results & key news in February
Click on the headline for the full story


Results & guidance:





















News:














ESG:










  • Williams
  • CN
  • ONEOK
  • Gibson Energy
  • Atlantica Sustainable Infrastructure


  • Alliant Energy
  • AEP
  • Atlantica Sustainable Infrastructure
  • National Grid
  • Williams



  • American Electric Power (AEP)
  • NextEra Energy
  • Southern Co










Investor Updates:








People:
Book 1x1s with corporate members now
Investors are invited to request 1x1 meetings with GLIO corporate members following results announcements. See the corporates available using the 'Book 1x1s' button below.
​
It's a great opportunity to catch up with current contacts or reach out to new ones to learn more following 2022 results. 
Member's Research
The global economy has entered a new regime characterized by higher interest rates, higher inflation, and low growth. Cohen & Steers believe it is time for asset allocators to add a listed component to their private infrastructure investments. Key findings in this report:

  • listed infrastructure can serve as a complement to private infrastructure as our analysis shows they have offered similar returns, volatility, equity market correlations, and diversification benefits.

  • Allocations to both listed and private provide diversification while helping investors optimize their portfolios across liquidity, risk, asset exposure, and other preferences.

  • Allocations to infrastructure can drive strong relative and absolute performance given the global economy has entered a new regime, characterized by higher interest rates, higher inflation, and low growth. 
Increasingly, investors are considering listed infrastructure to be a strategic allocation. They are allocating to the asset class as a complement to broad equities and fixed income and as a key constituency within a real asset allocation. Within this guide, CBRE review:
 
  • Institutional flows to the asset class and the implications for retail ownership. 

  • The portfolio benefits, the potential to enhance risk-adjusted returns, and potential allocations depending on investor risk tolerance. 

  • The complementary nature of listed and private infrastructure: liquidity, discounted valuations, and geographic/regulatory diversity.

  • The potential for returns from active management in the asset class.  
Spek Advisory finds that when simply calculating the correlation between listed and private infrastructure and equities using quarterly data, the correlation is high between equities and listed infrastructure and much lower between listed and private infrastructure.

However, there are several data issues that investors need to consider, for instance, currency effects, regional composition, and data quality. Once we've adjusted for regional differences, currency effects and when looking at the last 10 years, the correlation between listed and private infrastructure increases over longer time horizons.

For instance, when using 2-year or 8-quarter periods, the correlation between public and private infrastructure increased to 0.75, compared to 0.30 using a one-quarter horizon. The reverse is true comparing listed infrastructure and equities. The correlation between listed infrastructure and equities actually decreases from 0.70 to 0.40 over longer time horizons.

Cohen & Steers highlight similar findings in their report above.
GLIO Journal at a glance
GLIO Update and progress report
Founding GLIO members Jeremy Anagnos, CBRE Investment Management, Manoj Patel, DWS, and Ben Morton, Cohen & Steers, give their thoughts on the importance of an industry organization targeting this growth through investor education and awareness. Moreover, they encourage listed infrastructure corporates to join our collective campaign to raise the profile of the asset class.

Clicking the 'Membership Benefits: Corporates - Why Join?' button below outlines membership benefits to listed corporates. Slides 8-12 include testimonials from major investors such as ATLAS Infrastructure, BlackRock, ClearBridge Investments, Duff & Phelps, First Sentier Investors, Invesco, Jennison, Kempen, M&G, and Maple-Brown Abbott on why they believe growing the network is important.

Please email me if you'd like to learn more about membership benefits.
Listed v unlisted infrastructure
For investors looking to achieve inflation-linked absolute returns, the infrastructure asset class provides a number of attractive characteristics.

ClearBridge Investments highlight how over the past two decades infrastructure has emerged as a stand-alone asset class, and many large institutions have made sizeable allocations within their portfolios.

They argue that listed infrastructure provides investors with a broad, deep, and liquid range of infrastructure investment opportunities. As a result, it is a great alternative option versus unlisted or direct capital deployment in the infrastructure asset class.
Infrastructure's new investors and the age-old liquidity conundrum
Real Assets strategist Shaun Stevens notes that the increased interest in infrastructure in recent years is understandable, given its attractive returns in the years following the financial crisis.

Nonetheless, the liquidity problems currently affecting the non-traded REIT sector in the USA and open-ended funds in the UK are a warning to infrastructure investors choosing private assets. Infrastructure is an even more lumpy and illiquid part of the spectrum of real assets.
Macro factor sensitivities in listed infrastructure
Cohen & Steers examine performance across various market environments, providing a framework for understanding how infrastructure may fit in an asset allocation strategy and offering insight into the role of macroeconomic research in the investment process.

Key takeaways from the article are:

  • There is differentiated behavior in growth and inflation regimes;

  • The variety of subsectors offers opportunities in most climates; and

  • Macro outlook plays a vital role in the portfolio construction process.
The electrification path
European industry is undergoing an immense transformation. Over the past few years, its approach to the climate crisis has become characterized by a combative urge to invest in sustainable practices and processes.

Electricity will play a key role in this transformation, as confirmed in a new Elia Group study, Powering Industry toward Net Zero. 

Key findings, we need to:

  • kick-start electrification, industry needs favorable policies and regulations;

  • speed up the development of renewables to drive down prices;

  • accelerate the build-out of the transmission grid

  • foster flexibility as a double accelerator for industry
The inflation reduction act: a spotlight on infrastructure
CBRE Investment Management report on one of the most important pieces of energy legislation in US history, the Inflation Reduction Act (IRA), which was signed into law by President Biden last year.

The IRA’s overall spending package of $739bn aims to reduce the deficit and make major investments in climate change, domestic energy production, and healthcare.

Today, post the passage of the IRA, the outlook for infrastructure cash flow and growth has been simultaneously accelerated and elongated. The IRA improves on a generational scale the investment outlook for investors.
Utilities on the record
Question Master Steve Fleishman, Wolfe Research, asks the CEOs of leading US-based utility providers to share their planning and practical responses to recent legislation surrounding inflation and the transition to clean energy, interest rate pressures, and the wider impacts of customer affordability, all the while balancing their ESG commitments.

We lay out the responses from Julie Sloat, American Electric Power, Garrick Rochow, CMS Energy, Roger Perreault, UGI Corporation, and Scott Lauber, WEC Energy Group.
Julie Sloat, President & CEO
American Electric Power
Corporate in focus: Vopak
In a new format for us, we ask a leading listed infrastructure investor to interview a GLIO corporate member.

In this issue, Steven Kempler, Maple-Brown Abbott, poses questions to Dick Richelle, CEO of Vopak.

In the interview, they focus on:

  • Vopak's structural changes and reorientation over the last five years;

  • Contractual agreements, duration, and inflation protection;

  • the risks and opportunities created by the energy transition; and

  • Market valuations and opportunities for shareholders.
On the rails toward a lower carbon footprint
Jennison Associates looks at how North American railroad companies are highly focused on reducing their carbon footprints and believe they are concurrently well positioned to benefit from the carbon reduction targets of their customers.

They also believe the railroads are an attractive industry for infrastructure investors, given their ability to price above inflation through the cycle. Return on invested capital and free cash flow conversion have improved, enabling greater capital returns to shareholders. 
Telecom infrastructure - a structural growth story
We argue that Telecom Infrastructure is not only a fundamental part of any global infrastructure allocation, but it is also the backbone of how we communicate with the rest of the world.

It offers exposure to essential economic infrastructure assets and services, and it leverages the exponential secular growth in global wireless usage as a key driver of demand.

In addition, Question Master David Guarino, Green Street, also poses questions to CFOs Rod Smith, American Tower, and Brendan Cavanagh, SBA Communications. Plus, JB Rousselot, CEO of Chorus, focuses on developments in fiber.
Mind the gap: Political spending and lobbying
In the USA, political spending and corporate lobbying are well-established as legitimate business activities that give companies the means to have their interests heard by politicians and governments.

This is particularly true for listed infrastructure companies, whose remuneration frameworks are often underpinned by legislation or determined by regulatory bodies.

Maple-Brown Abbott investigates how the governance pillar is the bedrock of all ESG and sustainability progress, and, as past controversies have shown, a utility’s environmental and social attributes can become irrelevant when things go wrong. 
GLIO/GRESB ESG: engagement makes the difference
The world’s first infrastructure ESG index got its annual rebalance in November. Once again, companies that got in touch to provide more detail, on average, improved their scores.

Those who got in touch and provided feedback on their draft GRESB public disclosure score achieved, on average, significantly higher scores (77) or a very high B, than those who didn’t (59) or C.

Also, we show how GLIO members have increased their GRESB public disclosure score at a much faster rate compared to non-members. Overall, engagement and membership can make a difference. 
Academic viewpoint: Institutional infrastructure investment
Infrastructure investments are certainly nothing new, but it’s only recently that they have emerged as a distinct asset class. As part of the wider “private asset revolution,” institutional investors are increasingly allocating capital to infrastructure.

Maastricht University highlights that the real estate sector has an important lesson for infrastructure: listed vehicles (REITs, in the case of real estate) allow for liquid, low-cost, and diversified access to private markets.

They argue that a similar vehicle for infrastructure would provide much-needed capital for societally critical infrastructure projects and a stable source of income for our pension funds (and of course our citizens). 
Insurance investment in listed infrastructure
EY explores the potential benefits for insurers from accessing the liquid infrastructure corporate market and highlights the specific features of this asset class and the capital efficiency of infrastructure investments for European insurers.

An infrastructure investment that qualifies for a lower capital treatment under Solvency II presents an attractive proposition as an investment class for insurers. It provides favorable interaction with other assets in the portfolio and is appropriate for long-term asset-liability matching.

Both private and listed infrastructure can benefit investors, depending on their objectives and the underlying exposure they seek.  
Infrastructure to weather the storm
S&P Global Ratings outlines how the impact of inflation on infrastructure assets varies by region – and shares its outlook for the utilities and toll-road sectors. 

Transportation assets and utilities will undoubtedly have to find the right balance between passing through inflationary impacts and managing the affordability of their services and regulatory risks – whose nature and scale differ from region to region.

Overall, they conclude that infrastructure will likely live up to its reputation for resilience.
GLIO Index stats
The general principles of the GLIO Index are to capture companies engaged in activities critical to the day-to-day functioning of society and the global economy.

Companies selected derive more than 75% of EBITDA from the following infrastructure sectors: Regulated Network Utilities, Transportation, Energy Transportation and Storage, Communications Infrastructure and Renewables.

GLIO Journal back issues
www.glio.org