Those that have made high returns by overpaying for higher-risk/lower-quality credit have been lucky and credit conditions are unlikely to be so easy in the future, writes Michael Block. Now is the time to take a very thorough look at one’s credit exposures.
Scale is a double-edged sword but fund managers with the right model can make it work. And while other super funds are internalising as fast as they can, Aware Super will never completely abandon outsourced management.
Renewables bring might to the race for returns
There is little doubt that the world as we know it will change as a result of the COVID-19 outbreak and subsequent shutdowns. But how much? No one truly knows, but there is little doubt the task of investment and financial advisers has becoming increasingly difficult.
With bond markets offering little to no income and listed companies likely to take many years to move on from this crisis, leading advisers are moving towards a more ‘thematic’ approach to investing.
The premise is to identify those trends that are likely to deliver outsized, compounding returns over many years; take e-commerce or smartphones for instance. However, there is one particular powerful theme that is only just gaining traction; the transition towards cleaner energy.
Global governments have shown an incredible willingness to support their economies through a combination throughout COVID-19, but only so much money can be printed before something productive needs to be done.
One of the key beneficiaries will be infrastructure, but more specifically renewable energy sources such as solar and wind. Bloomberg New Energy Finance predicts that over US$10 trillion will be invested in new energy capacity in just the next 20 years.
The institutional capital flows have been substantial already and the public sector simply cannot carry the load themselves.
Enter Octopus Investments, one of Europe’s largest private players in Renewable Energy and who recently welcomed Australia’s Origin Energy as a strategic shareholder. Octopus has set themselves the lofty goal of helping build not only Australia’s but the developed world’s renewable energy future.
Octopus has an extensive track record in Europe, having built and managed over $5bn in renewable energy assets across 250 individual sites. They have now set their sights on Australia for two very simple reasons; our continued reliance on increasingly costly fossil fuels and the clear demand for alternative energy sources from the end consumer.
Having successfully delivered Australia’s largest solar farm at Darlington Point in NSW at over 333MWH, the team are now offering a unique investment opportunity to Australian high net worth investors and financial advisers.
Despite a chequered history for infrastructure investment in Australia, driven primarily by inexperienced players and direct subsidies, the sector is ripe with opportunity, offering equity-like returns of around 6-8% per annum and limited correlation with increasingly volatile equity markets.
In times like these investors are increasingly looking for security and whilst environment concerns may have been pushed down the priority list, it is clear that this will be one of the fastest-growing sectors in the years to come.
