Foreword by David Dixon
Colonial First State Global Asset Management is a leading fund manager,
with extensive global investment experience across a wide range of asset
classes and specialist industries. As a division of the Commonwealth Bank
of Australia group, the team has the advantages of membership of one
of Australia’s major banking groups.
Our Global Listed Infrastructure capability was established in early
2007, with the aim to deliver capital growth and inflation-protected
income by investing in a globally-diversified portfolio of listed
Infrastructure describes the physical assets that provide essential services
to society. The main areas of infrastructure we invest in are toll roads,
airports, ports, rail, water, gas and electric utilities, energy pipelines
and storage, and communication towers. These assets typically provide
investors with the attractive characteristics of high barriers to entry,
pricing power, sustainable growth and predictable cash flows.
Global listed infrastructure has a low correlation with more traditional
asset classes and can provide growth which is not dependent on
economic cycles. Listed infrastructure demonstrated its defensive nature
during the recent global financial crisis. It experienced lower volatility
compared to the broader economic market while outperforming
The demand for new infrastructure globally is immense. A 2007
report, titled Infrastructure to 2030 by the Organisation for Economic
Co-operation and Development, estimated that developed countries
will need to spend more than $70 trillion by 2030 just to maintain the
current level of infrastructure productivity. Many governments have
been under-investing in essential infrastructure for decades. A great
number of assets built in the 1950s and 1960s, including interstate
roads and nuclear generators, are coming to the end of their expected
lives. Governments globally are increasingly turning to the private sector
to fund this pent-up demand for infrastructure spending.
The long-term outlook for the global listed infrastructure sector is
positive, given the strong underlying demand for these essential services
after many decades of government under-investment. The Global Listed
Infrastructure Securities Fund is well positioned to take advantage of
these opportunities with our pragmatic investment style, absolute return
focus and specialised knowledge. The information contained within
this booklet highlights Colonial First State Global Asset Management’s
capabilities as a high-quality manager of listed infrastructure securities.
Chief Investment Officer
About Colonial First State Global Asset Management
Colonial First State Global Asset Management is the consolidated
asset management division of Commonwealth Bank of Australia,
one of the largest financial institutions in Australia.
Colonial First State Global Asset Management is Colonial First State Global Asset Management manages
the consolidated asset management division of more than A$138 billion across a diverse range of asset
Commonwealth Bank of Australia, one of the largest classes including Australian and global shares, short
financial institutions in Australia. term investments, fixed interest and credit, property
securities, direct property, global resources, unlisted
Colonial First State Global Asset Management is
infrastructure and listed infrastructure securities.
Australia’s largest manager of Australian-sourced funds,
employing more than 200 investment professionals Colonial First State Global Asset Management offers
located in Sydney, London, Edinburgh, Singapore, tailored investment solutions for retail, wholesale and
Hong Kong, new York, Auckland and Jakarta. Colonial institutional investors and aims to create wealth for its
First State Global Asset Management is also represented investors by applying an active and disciplined approach
in Beijing and Shenzhen through the First State Cinda to managing those investments. The business has made
joint venture. a strong commitment to provide the necessary resources
to ensure the long-term success of the Global Listed
Infrastructure Securities offering.
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Commonwealth Bank of Australia
Institutional Banking Institutional Banking Wealth International Retail Banking
and Markets and Markets Management Financial Services Services
Colonial First State
CommInsure Colonial First State
Global Asset Management
Global Listed Infrastructure
What is infrastructure?
Infrastructure describes the physical assets that provide essential
services to society. Around the world, billions of people rely
on infrastructure to live and do business. From the airports we
travel through, the toll roads we drive on, to the water we drink
– infrastructure assets are the backbone of any economy.
The main areas of infrastructure we invest in are toll roads, airports, ports, rail, water, gas and electric utilities, energy
pipelines and storage, and communication towers. Importantly, we do not invest in pure merchant power generators,
shipping companies, hospitals, schools, airlines, construction or mining companies that some may class as infrastructure.
The infrastructure sector covers a wide range of asset types which can be classified on the basis of the
services provided or source of demand
Toll roads Airports Ports Rail
private toll roads are built private airports are generally A port is comprised of all rail is comprised of the
and operated under long- operated under long-term the physical assets for the physical tracks and the
term concession agreements leases and subject to some handling of containers and operation of bulk cargo
from governments. The form of pricing regulation. bulk cargo to and from transportation and passenger
toll road operator charges revenue from privately commercial vessels. Facilities trains. passenger trains have
for use of the road, with owned airports is typically include berths, container regulated returns and bulk
price increases usually well diversified with income gantry cranes, storage transportation is usually
linked to inflation. Toll roads from aeronautical, retailing facilities and road and rail operated under long-term
have historically exhibited and property services. This transport to the port. These contracts. This sector has
strong volume growth income diversity can help assets are usually operated strong volume growth and
and low price elasticity. cushion volatility arising under long-term leases from improving pricing power.
from adverse external events port authorities and are
affecting travel patterns. generally local monopolies
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Energy Communications Utilities
Oil and gas storage and A communications network The utility value chain can
pipelines are generally refers to the physical assets, include water services,
owned by the private such as wireless towers and electricity generation and
sector with returns satellites that are capable of gas production, transmission
regulated to varying carrying communications. and distribution networks,
degrees. These assets are Some assets have long-term storage and retailing.
typically underpinned by customer contracts with Most networks are natural
long-term, capacity-based built-in price escalations. regional monopolies so
contracts which have no, prices are regulated to
or very limited, volume allow a reasonable return
or commodity price risk. on equity.
Characteristics of infrastructure
Infrastructure assets have a number of unique investment characteristics which appeal to a broad range
of investors, including:
Sustainable growth Infrastructure assets have a sustainable growth profile which is
relatively immune to economic cycles. In addition, many infrastructure
assets have delivered growth well above nominal GDP over a number
High barriers to entry In most cases, infrastructure assets are government legislated or natural
monopoly providers of certain essential services. For example, electricity and
gas distribution networks, toll road concessions with non-compete clauses
or city airports with restricted flight paths.
Pricing power Infrastructure assets tend to have the ability to consistently increase the
price of their services over time. This can be due to several factors including
tolls linked to inflation, real regulated returns and assets with high barriers
to entry making competition difficult and limiting customer choice.
Predictable cash flows These assets have an ability to generate cash flows which are highly
predictable. This predictability is underpinned by infrastructure’s essential
service nature, regulated returns, long-term contracts, limited cyclicality
and lack of commodity price exposure.
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A port is comprised of all the
physical assets for the handling
of containers and bulk cargo
on commercial vessels.
Source: port of Tauranga.
Advantages of global listed infrastructure
A portfolio of global listed infrastructure securities offers a number of advantages, including:
Diversification A listed infrastructure fund should offer a portfolio of 30-60 infrastructure
companies diversified by sector and country. This should reduce exposure
to event risks (eg a terrorist attack on an airport), regulatory risks (eg harsh
treatment of water utilities) or political risks (eg change in legislation).
Liquidity The size of the listed infrastructure market is more than US$1,000 billion,
so investors can have freedom to move in and out of positions.
Access to iconic assets With many governments preferring IPOs to trade sales, the only way for
investors to access many iconic infrastructure assets is via a listed fund.
It is expected that most governments will not allow these vital infrastructure
assets to become completely privately owned.
Potential for balance sheet Many listed infrastructure companies have balance sheets that are sub-optimally
optimisation geared. Over time, we are seeing listed infrastructure companies better utilising
their balance sheets in order to improve returns to equity holders. This process
drives share price appreciation within the listed infrastructure market.
Transparency Listed funds provide daily pricing so investors know exactly what their
portfolio is worth. Listed companies are typically more highly scrutinised
by regulators, governments, unions and the media. They also tend to be
conscious of environmental, social and governance issues.
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Investment objective, philosophy and style
Global listed infrastructure securities offer a more liquid
and diversified exposure to infrastructure than a portfolio
of physical assets.
Due to the emerging nature of this global sector, an Investment style
experienced team that specialises in infrastructure is best The Fund employs an active, bottom-up security
positioned to exploit market inefficiencies. The team’s selection process that aims to exploit market
flagship fund, the Colonial First State Wholesale Global inefficiencies. Securities are targeted where the market
Listed Infrastructure Securities Fund (the ‘Fund’), was underestimates the level and quality of sustainable
established in 2007 to provide investors with a mix of free cash flows. Through this, the fund manager will
strong capital growth and inflation-protected income. seek to earn excess returns by integrating a rigorous
stock selection process – leading to high conviction
Investment philosophy stock positions – with strict portfolio management
The Fund invests in infrastructure investments risk controls.
based on the following principles:
The Fund invests in infrastructure, infrastructure-related
Pragmatic and utility companies which control assets with
We seek to exploit market inefficiencies by combining monopolistic characteristics. The assets should have
attractive value with superior quality characteristics. high barriers to entry, strong pricing power, sustainable
growth and predictable cash flow. The Fund targets
companies with robust business models and strong
Investment choices are assessed in absolute terms.
Best investment ideas should create a portfolio,
not a benchmark.
Our specialised knowledge, combined with a globally
consistent, disciplined investment process, will add value
over the long term.
Investment objective: Our flagship fund’s objective is
to deliver capital growth and inflation-protected income
by investing in a globally diversified portfolio of listed
infrastructure and infrastructure-related securities.
The Fund has a six step investment process. 3. Valuation ranking model
Securities are ranked on a consistent discounted cash
flow valuation. Valuations are calculated using local
currency cash flows and bond rates, but globally
Portfolio consistent equity risk premiums and asset betas.
4. Qualitative ranking model
Each company is evaluated on 25 criteria that we
believe influence performance, including: infrastructure
characteristics, management, financial, regulation,
sustainability and equity flows.
Security Global Listed
Fundamental 5. Security selection
portfolio research Valuation and quality ranking results are combined with
fundamental analysis to determine a rating on each
Peer review security ranging from ‘0’ for sell recommendations,
to ‘3’ for high conviction buy recommendations.
6. Portfolio construction
ranking Valuation The portfolio is based on the team’s ratings. The
ranking weighting of the security in the portfolio reflects the
expected returns, the degree of the team’s conviction,
and the correlation with other securities in the portfolio.
These ratings clearly link the team security selection
1. Screening process with the construction of the portfolio to ensure
Securities which have poor infrastructure characteristics, the portfolio contains the team’s high-conviction ideas.
low liquidity or free float, low yield and growth are While the portfolio is constructed from the bottom up,
screened out in the first step of the process. region and sector risks are carefully monitored by the
2. Fundamental research portfolio managers as a risk management overlay.
An in-depth understanding of a company, the industry
in which it operates and the company’s position
within that industry is gained through fundamental
research. Valuable insights are sought into the
firm’s management, asset quality, financial position,
strategic direction, regulatory environment and overall
competitive landscape. This includes a consideration of
environmental, social and governance issues for the firm.
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forms a growing part of the
generation portfolios of most
The Fund’s opportunity set includes pure infrastructure sectors
such as toll roads, airports, ports, energy, communications
and utilities. The Fund’s opportunity set does not include
infrastructure-related sectors, such as pure merchant power
generators, shipping companies, hospitals, schools, airlines,
construction or mining companies. Below are examples of
assets in each of the sectors in which the Fund invests.
Toll roads Airports Ports Energy
Abertis Vienna Vopak Spectra Energy
Atlantia Sydney Hamburger Hafen TransCanada
407 ETr Brussels port of Tauranga El paso
Aprr paris Forth ports Enbridge
M6 Toll Zurich Kamigumi pembina
Citylink Signature China Merchants Kinder Morgan
M2 Hills Motorway Atlantic Dp World Enterprise products
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Communications Utilities Rail
American Tower E.On Central Japan railway
Crown Castle GDFSuez East Japan railway
SBA Communications national Grid norfolk Southern
SES Global Enagas union pacific
Eutelsat Southern Company Burlington northern
Duke Energy CSX
California Water Groupe Eurotunnel
Genese & Wyoming
Global Listed Infrastructure Securities Fund breakdown
Fund weights by sector Fund weights by country
I Integrated Elec/Gas 21.0% I United States 31.0%
I Roads 18.0% I France 18.0%
I Ports 14.0% I Japan 10.0%
I Regulated Elec/Gas 12.0% I Britain 8.0%
I Communications 12.0% I Spain 7.0%
I Rail 9.0% I Germany 6%
I Airports 8.0% I Netherlands 5.0%
I Energy pipelines 4.0% I Australia 5.0%
I Water 3.0% I Italy 3.0%
I Cash 1.0% I Switzerland 3.0%
I Canada 2.0%
I Austria 2.0%
I Hong Kong 2.0%
I New Zealand 1.0%
I Cash 1.0%
I Portugal 0.0%
Figures are at 30 September 2009.
Figures may not sum to 100 due to rounding.
CFS GLIS Performance vs Benchmark
Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09
Source: CFS GAM, uBS 50/50 Global Infrastructure & utilities 50-50 Index as at 30 September 2009.
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refers to the physical assets
of communications such as
broadcast towers and satellites.
Environmental, social and governance (ESG) issues are
fundamental to infrastructure companies, given they have
significant service obligations and moral accountability to
the communities in which they operate. The Global Listed
Infrastructure Securities team incorporates ESG accountability
into its investment process. Companies are rated on ESG
using historical track records, management key performance
indicators and external surveys.
Colonial First State Global Asset Management is – the dominant shareholders and protection
a signatory to the united nations principles for of minority interests
responsible Investment and subscribes to a global – the board composition
database of 2,000 companies researched by Innovest
– total shareholder returns and return on investment
Strategic Value Advisors.
as management incentive targets, and
Environment – a long history of transparency and financial disclosure.
Key environmental issues for consideration include:
External research tools
– the historic environmental safety record
As part of its ongoing commitment to integrate ESG
– how companies have dealt with past considerations into its investment processes, the Global
environmental problems Listed Infrastructure Securities team engages third
– a good history of operations in sensitive wilderness party research providers and accesses high-quality ESG
areas, and research. The following are some of the external research
– public leadership on environmental issues. tools the team employs.
Innovest Strategic Value Advisors, Dow Jones
Key social issues for consideration include: Sustainability Index, Davos 100 Most Sustainable
– the strength of community, customer and supplier Companies, The united nations Global Compact.
– employee safety and inclusion in management’s key Innovest Strategic Value Advisors, The united nations
performance indicators Global Compact, Corporate responsibility Officer (CrO)
– an understanding of the companies’ internal culture ‘100 Best Corporate Citizens’, American Customer
– sensitivity when dealing with indigenous Satisfaction Index, J.D. power Customer Surveys.
populations, and Governance research
– display of public leadership on social issues. ISS’ Corporate Governance Quotient, Governance
Matrix International, Audit Integrity’s Most Trustworthy
Governance Companies, Innovest Strategic Value Advisors, Corporate
– Key governance issues for consideration include: responsibility Officer (CrO) ‘100 Best Corporate Citizens’,
– the degree of political interference, especially where GlassLewis.
government is a major shareholder
– the accountability of externally managed vehicles
and related party transactions
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revenue from privately
owned airports is typically well
diversified with income from
aeronautical, retailing and
Source: Macquarie Airports.
Peter Meany Andrew Greenup
Peter Meany Andrew Greenup
Head of Global Infrastructure Securities Portfolio Manager
peter joined Colonial First State Global Asset Andrew joined Colonial First State Global Asset
Management in January 2007 as Head of Global Listed Management in July 2005 as a senior analyst in the
Infrastructure Securities. peter brings more than 10 years’ Core Australian Equities team. Since then, Andrew has
experience in the infrastructure and utilities sectors. prior analysed five industry sectors as well as being a back-up
to joining Colonial First State Global Asset Management, portfolio Manager. prior to this, Andrew worked at Allianz
peter was responsible for research coverage in these Global Investors as a senior analyst in Australian equities.
sectors at Credit Suisse Equities (Australia). He received Before funds management, Andrew worked at Credit
top rankings in a number of industry surveys and was Suisse First Boston as an equities analyst and AnZ Bank
involved in a number of company defining corporate as a credit analyst.
transactions. prior to Credit Suisse, peter was an analyst
Andrew holds a Bachelor of Business (First Class Honours)
at Macquarie Equities when the infrastructure sector
from the Queensland university of Technology (QuT) and
was in its infancy.
was awarded the QuT university medal.
peter holds a Bachelor of Economics (Finance) from
He has completed the Graduate Diploma in Applied
Finance and Investment from the Financial Services
Institute of Australasia.
Andrew is the Global Listed Infrastructure Securities
team’s representative on the Colonial First State
Global Asset Management united nations principles
for responsible Investment implementation
committee and leads the team’s approach
to ESG investment considerations.
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Rebecca Sherlock Edmund Leung
Rebecca Sherlock Edmund Leung
Senior Analyst Analyst
rebecca joined Colonial First State Global Asset Edmund joined the Global Listed Infrastructure team as
Management in April 2008 as the Senior Analyst in the an Analyst in February 2009. His responsibilities include
Global Listed Infrastructure Securities team. rebecca’s stock coverage, involving meetings with management,
primary focus is conducting detailed stock analysis, producing detailed financial models, qualitative reviews
including financial modelling, qualitative reviews, and the presentation of stock ideas to the team.
report writing and presentation of stock ideas.
Edmund initially joined Colonial First State Global Asset
prior to joining Colonial First State Global Asset Management in January 2007. His investment experience
Management, rebecca worked for Ernst & Young over this time included smaller companies analysis
Transaction Advisory Services. She was responsible with the Asia-pacific/Global Emerging Markets team in
for financial modelling, business case preparation, Hong Kong and credit analysis for a number of sectors
valuation analysis and bid price advice. with the Global Fixed Interest and Credit team. prior to
joining Colonial First State Global Asset Management,
rebecca holds a Bachelor of Science in Mathematics
Edmund was an Actuarial Analyst at Aviva Australia
– First Class from Sheffield university and is also a
conducting financial modelling and analysis of wealth
Chartered Accountant with the Institute of Chartered
Accountants in the united Kingdom and Wales.
Edmund holds a Bachelor of Commerce (Hons) from the
university of Melbourne and has passed all three levels
of the CFA program.
Where appropriate, the Global Listed Infrastructure
Securities team also utilises the input and expertise from
other investment teams within Colonial First State Global
Asset Management, including unlisted Infrastructure,
Global resources and Global Equities.
Find out more
The purpose of this information booklet is to provide a brief overview of the Global Listed Infrastructure Securities
business of Colonial First State Global Asset Management.
Further information about our business, our practices and our policies can be found on the Colonial First State
Global Asset Management website, cfsgam.com.au.
Joanna Davison Liz Krajewski
regional Managing Director Australia and new Zealand Head of Institutional relationship Management
phone: +61 2 9303 7007 phone: +61 2 9303 2927
Email: firstname.lastname@example.org Email: email@example.com
Peter Meany Rebecca Sherlock
Head of Global Infrastructure Securities Senior Analyst
phone: +61 2 9303 2456 phone: +61 2 9303 2655
Email: firstname.lastname@example.org Email: email@example.com
Andrew Greenup Edmund Leung
portfolio Manager Analyst
phone: +61 2 9303 6720 phone: +61 2 9303 6618
Email: firstname.lastname@example.org Email: email@example.com
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