Investable assets with long duration and stable yields (and they're not even listed)
As the (very big) "furniture" off which telecom companies hang their technology, so-called macro towers are core to our mobile and data networks. The 4,000 towers that one operator owns across mainland Europe - and a company Invest Unlisted is about to add to its portfolio - underpin a business with an average 18-year contract period
“It’s exactly what we’re using now," said Jonathan van Rooyen, Invest Unlisted's CIO, referring to the internet technology (via cable broadband and Zoom software) that hosted our interview: "The COVID experience has put us all behind screens and across data waves that have to go through towers, data centres and spectrum."
The infrastructure CAPEX explosion
More broadly, governments across the developed world – including here in Australia – are pouring trillions of dollars into the stuff that connects, moves, heats, cools and feeds their people. Many of these assets will never list on a securities exchange.
Highlighting the scale of the opportunity, including huge volumes of ageing bridges, roads and other public works in dire need of money for maintenance, the US Government has committed $4.5 trillion as part of its Build Back Better plan. And governments here in Australia and also Europe are embarking on their own multi-billion (or trillion) dollar infrastructure programs.
“We’re seeing some of the biggest transactions in Australia, ever, as institutional investors put their money where their mouths are,” says Van Rooyen.
“Those are the types of signals that tell SMSF investors what an exciting time we’re currently in. But they then may ask how they can access these assets.”
In the following interview, Van Rooyen delves into the scale of the opportunity and compares traditional infrastructure assets with those that are unlisted. As the name of his organisation hints, that's their "special sauce". And as the tech play described earlier suggests, it's not only motorways and heavy rail.
The portfolio of more than 40 assets in Invest Unlisted’s portfolio is drawn primarily from Australia (75%) and New Zealand (less than 5%), but offshore infrastructure assets also feature.
“We are looking at some really exciting offshore assets currently, and in new sectors,” says Van Rooyen. Watch the following interview, or read the edited transcript below, to find out more.
Does Invest Unlisted hold only domestic assets or can it also look offshore?
We have the ability to allocate offshore and we are doing that currently. 80% of the portfolio is in Australia and New Zealand, (75% Australia and a small allocation to the New Zealand infrastructure assets), but we are looking at some really exciting offshore investments currently, and in new sectors as well which are perhaps less available in the Australian market, given our smaller size.
What are some of the key pockets of opportunity you see within unlisted infrastructure?
We're currently reviewing a terrific opportunity with a European telecom tower provider. Four and a half thousand telecom towers that support some of the operators in mainland Europe. They hold terrific assets with 40% of the business holding weighted average contracts of 18 years. Those are the sorts of new infrastructure that we're quite excited about and that's an example of going offshore while being disproportionately invested here in Australia and New Zealand. That's a good example of what we would get excited about in terms of those new sectors globally.
This is an example of digital infrastructure. We think about telecom towers, we think about data centres, spectrum and the like. We as a portfolio had a good look at the mid-band, the US government's communication commission auction in December last year, where they were auctioning off some mid-band spectrum. That's another great example of new infrastructure.
Fibre and co-location associated with data centres are some really terrific new infrastructure too and exactly why we are using spectrum broadband.
The COVID-19 experience has put us all behind screens and across data waves that have to go through towers, data centres, spectrum, and so on. So it just underpins and emphasises why that asset class is really compelling going forward.
Why is now a good time for investors to consider unlisted infrastructure?
We're in a low-interest-rate environment, which is terrific. I think we've got healthy levels of inflation, remembering that some of our assets allow inflation pass-through. We welcome a healthy degree of inflation, and we've got natural protections around that.
In terms of fundamental growth globally, we're seeing healthy levels of growth, and we're seeing significant demand for capital expenditure in relation to infrastructure renewal. Everyone's seen the great numbers that are thrown around in the US, and we'll invest cautiously in the right sectors so we don't get too excitable about those big numbers, but what it does signal is there are certain areas of deployment that are really attractive, so that's another area that we were focused on.
Fundamentally, some of the informed institutional investors are sending the price signals, aren't they? They're saying some of these listed infrastructure stocks are fundamentally undervalued, and we're seeing some of the biggest transactions ever in Australia.
Those big institutional investors are putting their money where their mouths are. Those are the sorts of signals that the SMSF investor can look to and say, wow, this is a really exciting time, and what's my mechanism of access to this terrific asset class? We think the green shoots are well and truly there, we think some of the noise and the heat's come out of the values. And so, we're really excited about the positioning for the next cycle.
Unlisted Infrastructure adds balance to your portfolio
Tap into the concrete infrastructure assets that have been off-limits to everyday investors for more than 20 years. Find out more.
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