SMSF investors looking at long term investments can still find high single digit returns outside of stocks without losing the risk profile of cash and bonds, according to a senior infrastructure investment manager.
AMP Capital Community Infrastructure Fund Manager Charles Savage said community infrastructure investments were attracting more interest from smaller sophisticated investors due to total returns of between 7 and 9 per cent combined with lower risk factors than stocks or mainstream infrastructure.
“The yield is between 8 and 10 per cent, which is attractive to those funding pensions, and the risk factors are lower because the counterparty involved is usually a state government looking at a 30 year concession over the underlying infrastructure,” Savage said.
He added this was not as high as other infrastructure funds, which offered returns above 10 per cent, but was offset by the counterparty arrangements which offered stable return and yield figures for up to 30 years for investors.
Savage said community infrastructure was a lesser known subset in the wider infrastructure investment space and typically focussed on assets with a positive community impact, such as hospitals, schools, water storage and treatment, prisons and sporting facilities.
“Our approach is that we require an institutional grade return and the use of the asset is strictly controlled via the concession.
“The advantage for a government is they retain the asset at the end of the concession but it is maintained at a high level throughout that time and investors receive a yield on their investment as well as their principal plus interest at the end of the concession.”
While the Community Infrastructure Fund is typically only open to institutional investors, Savage said there is discretion to allow smaller investors into the fund, including SMSFs, which took place when the fund first opened in late 2006. At that time half of the initial investors were high net worth individuals or SMSFs.
For those interested in the fund, he advises a long-term investment timeframe of around five years and cautioned exits from the fund could take up to six months as it was illiquid and any holdings would have to be sold to other investors within the fund.
“We want people to stay and the fund provides cash flow into retirement and so far most investors stay for five to 10 years or even longer.”''