Listed Portfolio

The listed portfolio is well diversified across and within the real estate and infrastructure sectors. Infrastructure provides the backbone to many modern economies, be it through the provision of electricity (generation, transmission and distribution), natural gas (transmission and distribution or supply), water, waste management and various transport infrastructure (roads, airports, rail networks, harbours, toll roads). More recent additions to this sector include telecommunication towers, broadband and Wi-Fi services. Retail real estate and infrastructure assets share similar characteristics. 

The table below compares these sectors:

Key description 

Retail REITs

Infrastructure assets 

Type of consumer spending

Discretionary consumer spending 

Non-discretionary consumer spending, required utilities and services.

Impact of government policy 

Low interest rates may have assisted consumers and supported valuations of REITs.

Low interest rates may have assisted consumers and fiscal policy may increasingly boost this sector. 

Asset duration 

Long duration assets 

Long duration assets.

Driver of return on equity ("ROE")

ROE generated primarily through net margins and leverage, not asset sales.

ROE generated primarily through net margins and leverage, not asset sales.

Dividend policy 

Large proportion of net operating income pad as dividends.

Large proportion of net operating income pad as dividends.

Valuation metric 

Free funds from operations ("FFO"), an operational cash flow measure.

Adjusted cash flow from operations, an operational cash flow measure.

Debt-to-enterprise value

Typically between 30%-40%.

Typically between 35%-50%.

Income tax

REITs exempt.

Sometimes exempt, frequently incentivised though up-front tax deductions.

Research coverage 

Established, well-researched sector

Under-researched sector.

Commodity price sensitivity

Indirect exposure to prices of energy.

More direct exposure to various forms of energy.

The investment case for the infrastructure sector is compelling:

  • Large scale investment in infrastructure required due to underinvestment in developed countries as well as growth in emerging regions
  • Increased reliance on private sector to drive infrastructure development in order to reduce burden on public finances 
  • High barriers to entry due to physical, regulatory and capital constraints
  • Long duration assets in most cases 

The investment characteristics of infrastructure investments are as follows:.  

  • Stable cash flows as income models are generally fixed, contracted or regulated over a period of time
  •  Defensive investment due to inelastic demand profile as a result of providing essential products and services such as water, power and transportation. 
  • Inflation protection from inflation-adjusted revenues and margin stabilisation  mechanisms 
  • The dividend yields on infrastructure investments are higher than those of global equities and bonds 
  • Historically less volatile
  • Margin of safety due to low payout-ratios in general
  • Large, liquid sector with high free float 
  • Gaining increasing recognition as an asset class 

  Greenbay established  prime broking relationships with Bank of America Merrill Lynch, Morgan Stanley and JP Morgan.