Investors ‘slow to appreciate’ listed infra performance

Giles Frost, a director at listed infrastructure fund INPP, has said the investment community has been slow to pick up on the strong performance of listed infrastructure, both against stock market benchmarks and unlisted infrastructure. INPP announced its interim six-month results today.

In a conversation with Infrastructure Investor following the announcement of his firm’s interim six-monthly results, International Public Partnerships (INPP) director Giles Frost said listed infrastructure was delivering out-performance versus both stock market benchmarks and unlisted infrastructure funds.

Frost pointed out that an INPP share acquired when the firm listed in 2006 has by now delivered a return of 43.3 percent compared with a negative return of 0.7 percent for the FTSE All Share Index over the same period. With INPP also providing yield of around 5 percent at its current share price, he claimed that “infrastructure stocks are showing very interesting yield characteristics for investors”.

Furthermore, he added that although the listed sector tends to be seen as “not terribly attractive” to the larger limited partner groups, he said listed infrastructure funds’ performance has been “pretty stellar” compared with some unlisted infrastructure funds. “There has been a slow appreciation by the investor community that listed infrastructure is capable of outperforming the unlisted market,” he said.

In its interim results statement for the six months ended June 30 2011, INPP unveiled an increase in net asset value (NAV) to £550.0 million (€622.2 million; $897.6 million) from £541.9 million at the end of last year. NAV per share rose from 113.1 pence to 113.6 pence over the same period.

The firm made 13 new investments during the reporting period, investing £39.8 million in the likes of the A$1 billion Gold Coast Light Rail project in Australia and the UK offshore transmission project at Robin Rigg. Since then, it has invested a further £68.7 million on acquiring Building Schools for the Future Investments and in a second UK offshore transmission project at Gunfleet Sands.

Frost said the firm was developing a potentially lucrative partnership with investors in Building Schools for the Future Investments, which was previously owned by the UK government and which has interests of up to 20 percent in 48 Building Schools for the Future (BSF) projects which utilised private sector capital. The vast majority of the BSF programme was axed by the Coalition government just over a year ago.

Frost said: “We have normally had over 100 schools in our portfolio, so it’s a sector we know a lot about. Our minority interest comes with enhanced minority control, which means we have power to influence how the portfolio is run. We also have certain pre-emption rights where, if an investor wants to sell, we have first right to buy. So we can step up our investment as some local authorities might want to reduce their exposure.” He also said that the firm was looking at using the BSF framework to move into new areas such as social housing.