Infrastructure’s defensive role in investors’ portfolios is being put to the test by the COVID-19 crisis. Some sectors have been hard hit, with airports, seaports and some toll roads experiencing the biggest impact.
Companies involved in midstream assets that transport energy, a mainstay of many energy and some infrastructure funds, also are being hurt by plummeting oil prices. EDHECinfra’s Unlisted Road index dropped 13.67% for in the first quarter, while its Unlisted Airport index was down 10.16%.
EDHECinfra, an EDHEC Business School venture, provides global infrastructure indexes and research. However, other infrastructure sectors, including telecommunications and digital as well as renewable energy, are expected to be more resilient.
Core infrastructure generally is designed to be defensive, with resilient and solid downside protection, said Lisa Bacon, San Diego-based principal, private markets consultant and infrastructure program lead at consulting firm Meketa Investment Group. Value-added and opportunistic infrastructure investments are less defensive.
Ms. Bacon said most of her clients’ portfolios contain infrastructure equity and very little infrastructure credit. Some infrastructure equity investors are also looking to infrastructure as an inflation hedge.
“What we are experiencing right now is an almost unimaginable economic shutdown across the globe," Ms. Bacon said.
Some sectors have been hard hit, with airports, seaports and some toll roads experiencing the biggest impact. Companies involved in midstream assets that transport energy, a mainstay of many energy and some infrastructure funds, also are being hurt by plummeting oil prices.
EDHECinfra's Unlisted Road index dropped 13.67% for in the first quarter, while its Unlisted Airport index was down 10.16%. EDHECinfra, an EDHEC Business School venture, provides global infrastructure indexes and research.
However, other infrastructure sectors, including telecommunications and digital as well as renewable energy, are expected to be more resilient.
Core infrastructure generally is designed to be defensive, with resilient and solid downside protection, said Lisa Bacon, San Diego-based principal, private markets consultant and infrastructure program lead at consulting firm Meketa Investment Group. Value-added and opportunistic infrastructure investments are less defensive.
Ms. Bacon said most of her clients' portfolios contain infrastructure equity and very little infrastructure credit. Some infrastructure equity investors are also looking to infrastructure as an inflation hedge.
"What we are experiencing right now is an almost unimaginable economic shutdown across the globe," Ms. Bacon said.
The crisis is turning into an "academic test of the resiliency of infrastructure," she added. "We're seeing most things hold up as we would expect."
Already, some asset owners and infrastructure managers have taken write-downs. IFM Investors, a Melbourne-based investor-owned infrastructure manager, wrote down some of its assets by about 8%, said a spokeswoman in a written response to questions.
IFM values its portfolio on a quarterly basis, she said.
"Prior to the end of the March quarter, IFM Investors responded to material changes in operating and market conditions for our assets as a result of the COVID-19 pandemic by applying an out-of-cycle revaluation to certain assets in our global and Australian portfolios," she said.
IFM wrote down its airport, seaport and toll road assets, which have been significantly affected by travel restrictions and community lockdowns, she said.
Airports were the most disrupted by the pandemic, with seaports affected to a lesser extent because the virus-related restrictions have more to do with the movement of people than freight, she said.
"Our (public-private partnership) assets, including rail stations and schools, have been resilient given they need to remain open and are backed by government availability payments which provide a steady income stream," the spokeswoman said.