A new report “from the coalface” of super fund investing has gone some way to quantifying the cost of shonky investment management, with members potentially losing out on hundreds of thousands of dollars.
Surging equity markets have driven the Future Fund’s return higher, but its prediction that inflation will be stickier than expected has been born out and it “remains conscious of the potential for significant deterioration”.
AMP Capital looks to real changes in 2021
Real asset investors are turning to face the strange environment of 2021 as technological and social trends mix with a global pandemic to fast-forward fundamental changes, according to the latest AMP Capital market outlook.
“Disruption has accelerated changes underway in modern living – and the pandemic is still far from over,” the AMP Capital report says. “2021 is a different and uncertain landscape.”
As well as the ongoing fallout from the COVID-19 crisis, the report, which summarises views of various AMP Capital real asset managers, says technology, climate change, unconventional monetary policy and environmental, the US political transition, social and governance (ESG) will all weigh heavily on the sector this year.
Already in high demand following low-interest rate era initiated by the global financial crisis, real assets – including real estate and infrastructure – saw a further influx of “dry powder” post-COVID as investors sought yield amid the extra monetary stimulus, the outlook says.
“In a more positive development, a commitment to confronting climate change and heightened social awareness became entrenched as crucial issues,” the AMP Capital report says.
For example, Roopa Murthy, AMP Capital infrastructure debt partner, says ESG experienced a notable uptick in investor interest in 2020.
“While institutional investors have been taking it into account for years, we saw a remarkable shift this year in how fundamental it has become to investors,” Murthy says. “… this has translated into the deals we are looking at as we seek opportunities of scale in new green subsectors, and also develop the reporting and monitoring of our portfolio and its supply chains.”
She says the emerging ESG enthusiasm has opened up real asset investments such as energy-from-waste and digital infrastructure. Electrification would be a key trend in 2021, Murthy says, although investors are still mulling over the best way to tap into the market via options such as vehicle charging infrastructure.
“… a simpler way into electrification is investing directly in the energy transition: ‘phase out’ power deals have been popular this year, where investors support the transition of an existing energy asset to a cleaner energy source – if they can get comfortable with the upfront environmental risk,” she says.
Elsewhere, the AMP Capital real asset team is eying up opportunities in trends such as decarbonisation, new-age office developments, data centres, e-commerce and ‘connectivity’.
Emma Haight-Cheng, AMP Capital infrastructure debt partner, says the last 12 months has highlighted “the importance of connectivity which facilitates working remotely and reducing the need for travel”.
“While in some industries activity was put on hold in 2020, there’s been no slowing of digital infrastructure deal flow,” Haight-Cheng says. “We believe that changes to work structure will be lasting and will open up a more flexible future workplace. This reinforces the need for both home connectivity and cloud infrastructure.”
At the same time, Boe Pahari, AMP Capital global head of infrastructure equity, says emerging markets have now gone “mainstream” for real asset investors.
Pahari says AMP Capital made two major emerging markets infrastructure plays last year in an “e-mobility platform” and a power transmission business.
“Both the true globalisation of the infrastructure asset class, and the scale of the opportunity for emerging countries to lead the energy transition, are creating opportunities into 2021,” he says in the report.
Based in London, Pahari was briefly AMP Capital chief executive last year, stepping down to his previous infrastructure role in the wake of a sexual harassment scandal. His exit sparked a board and management change across the already embattled ASX-listed company, which is now subject to a takeover offer from US investment firm, Ares Management.
“Disruptions accelerate change,” Pahari says.
