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Infrastructure assets are long term, capital intensive long-term, investments that serve the community through the provision of essential community services. Good infrastructure provides key economic services efficiently, improves the competitiveness of, and generates high productivity for the economy.
RUSSELL OPENWORLD
RUSSELL INVESTMENTS
Chart 1: Better, resilient and secure dividends, Rolling 12 month yield payments
$4.5 $4.0
Rolling 12 month $ return*
S&P GLIF - Rolling 12 month Net distribution (LHS) MSCI World Utilities - Rolling 12 month Net distribution (LHS)
MSCI ACWI - Rolling 12 month Net distribution (LHS) FTSE EPRA/NAREIT Developed - Rolling 12 month Net distribution (LHS)
Source: Bloomberg & MSCI. Data as of end January 2012. The calculations are based on the implied net of tax yield (derived geometrically from the difference between the Total Return (Net) and Price versions of the respective indices). * The rolling 12 month US$ returns are calculated based on a buy-and-hold US$100 investment, as at the end of Dec. 2005.
This makes infrastructure and utility companies more attractive as yield investments. What is important to note is that companies were paying dividends from their core operations, and not through issuance of bonds, taking out loans or out of capital. Utilities, which make up anywhere between 45-75% of the strategy, are more defensive than the transports, and offer more stable dividend payments given their regulated business model. Having said that, much to most peoples surprise, transports (toll roads, airports, railways and ports) also offer very attractive and secure dividends (see chart 2 below).
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RUSSELL OPENWORLD
RUSSELL INVESTMENTS
Chart 2: Attractive dividend yields, not just a utility story (Primary sectors in the S&P Gbl Infrastructure Index (weight in index in brackets) % Yields 7 6 5 4 3 2 1 0
Electric Multi-Utilities Utilities (24.5) (12.9) IPPs (0.7) Water Utilities Highways & Airport Marine Ports Oil & Gas (0.2) Railtracks Services (10.4) & Services Storage & (17.1) (11.5) Trans. (22.6)
Based on extensive analysis of the underlying infrastructure assets of companies, our global manager will allocate across sectors primarily from a bottom-up perspective. Our Sydney-based manager, RARE, will invest in a conviction portfolio of 35-50 pure infrastructure companies from a total return perspective, irrespective of index weightings.
OW Global Listed Infrastructure (Gross) cumulative XS return vs. S&P Global Infrastructure Index Net OW Global Listed Infrastructure (Gross) cumulative XS return vs. MSCI World Index Net
Source: Russell, Bloomberg and FactSet. Data as of end of December 2011 Page 3
RUSSELL OPENWORLD
RUSSELL INVESTMENTS
Table 1: Returning positive returns in declining markets last year, and healthy dividends makes for a
2009* OW GLIF (Gross) S&P Global Infrastructure Index Net MSCI World Index Net
Source: Confluence, all returns are in USD
Yield 2009 OW GLIF (Gross)* S&P Global Infrastructure Index* MSCI World Index Net* 4.2% 4.0% 2.6% 2010 4.8% 4.1% 2.4% 2011 4.6% 4.7% 2.8%
*Market weighted running yield of the underlying holdings as of the end of the year Source: FactSet, all yields are in USD
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