In a report titled Listed Infrastructure Sector review, Zenith “sought to reassess whether the asset class can continue to retain its more defensive characteristics” given recent market volatility.
The report assessed the volatility and 'Sharpe' ratios (a measure of risk-adjusted return) of a number of fund managers and noted that all the reviewed managers had lower betas than global equity, as well as positive Sharpe ratios.
Zenith did, however, note “material changes to observed betas” over the 2015 calendar year and less positive Sharpe results across the broader infrastructure sector, citing this divergence as evidence for the value of an active investment approach.
This divergence is due in part to the alignment of certain commodities with particular sub-asset classes, such as oil and gas transportation being negatively affected by “relentless declines in oil and commodity prices”, the report added.
“A passive approach to investment can inadvertently expose investors to securities that are highly sensitive to commodity movements; we reiterate the importance of active management when considering exposure,” it said.
The report stated that listed infrastructure’s defensive characteristics could be “harvested” through an active management approach, and there is still potential for good returns.
“Infrastructure remains a compelling investment opportunity, with the ability to provide elevated yield, a more defensive return profile relative to global equities and broader diversification benefits,” it said.
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