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Outlook 2015: Mid-market value (0)

AMP's Boe Pahari expects strong deal flow in Australia and "trophy" asset sales in Europe – while listed infra chief Tim Humphreys anticipates shale to continue driving energy opportunities in the US.

Boe Pahari, global head of infrastructure equity at Australian asset manager AMP Capital:

“Around the world, we continue to see direct infrastructure investment focused on utilities and other cash-yielding assets in 2015. In Australia, ports will also be strong while in the US, the power and midstream energy infrastructure sectors are likely to attract a lot of interest driven by excess gas supply and improving economic conditions. In Europe, airports and telecommunications infrastructure are expected to be hotspots of activity and we expect to see both increasing deal flow and greater investor confidence in countries such as Spain, Portugal, Italy and Greece.

We’re expecting deal flow to be particularly strong in Australia, driven by the asset sale programs flagged by the New South Wales and Queensland state governments, and the US, particularly in the energy and utilities sector as well as in secondary markets. Europe, however, will likely have significant capital flows chasing relatively limited deal flow particularly for large-scale ‘trophy’ assets. We believe mid-market assets, which represent the biggest market, to offer the greatest opportunity for bilateral or negotiated sales processes and best relative value for investors.”

Tim Humphreys, AMP's head of global listed infrastructure:
“US growth and its impact on interest rates will have the biggest effect in 2015. Rising interest rates should be an indicator of economic activity picking up, which in turn increases the demand for infrastructure. The US has experienced a rapid increase in natural gas and oil production from shale deposits and is the now the largest producer of petroleum and natural gas in the world. We expect these trends will require vast amounts to be spent on infrastructure, approximately $35 billion during the next 12 months alone.

US energy infrastructure, specifically pipelines and other assets that have long-term secure contracts, offer a safe way to play the increased production of oil and gas in the US and Canada and offer the upside without the sensitivity of a direct exposure to the oil or gas price. Quality and diversification remain key fundamentals for 2015. High-quality companies have better managements and better assets and as a result they outperform over the longer term. Investors should focus on diversifying across regions and stocks. By looking globally, you have a much bigger pond to fish in.”