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Infrastructure

Positive infrastructure opportunities from US

A specialist fund manager has revealed the United States pipeline sector as an area for positive growth with regard to infrastructure investing in 2018.

“These companies are helping to move gas, oil and energy around the US. What we’ve seen is an uptick in oil prices over the course of the last 12 months, we’ve seen an uptick in exploration and production activity, but what we haven’t yet seen is an uptick in the company names that are involved in building out the infrastructure to support all of that activity,” RARE Infrastructure co-chief investment officer Nick Langley revealed.

He added RARE had expected opportunities to invest in the companies supporting the delivery of US energy to emerge in 2017, but had to wait until this year for them to manifest.

“So it’s US pipeline exposure which will benefit from the increased activity around the oil and gas market through the course of this year,” Langley noted.

In addition to pipelines, RARE also expected some opportunities to invest in US utility companies due to cheaper pricing of these stocks as a result of other economic factors, he said.

“We are hoping that we’ll get a bit of a pop in US bond yields. We think that at some point during the year they’ll probably go through 3 per cent and maybe end the year a little under 3 per cent,” he pointed out.

“As that happens we’re hoping [US utility] companies will become a little bit cheaper and we can step into them.

“We expect that we’ll be able to buy them with look-forward returns in the low double-digit range, which is a pretty attractive return for a very boring utility that’s paying you 4 or 5 per cent dividend yield, and another 5 or 6 per cent capital growth on top of that backed by growth in their underlying asset base.

“That’s actually a perfect return for an infrastructure fund.”

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