A first successful year for the Solidarity banker programme2019/05/16
- 3 min
CPR AM launches CPR Global Infrastructures, a theme fund investing in international equities
Investment in the infrastructure sector has grown substantially over the last few decades and this trend looks set to continue, driven in particular by the growth and urbanisation of emerging markets. To capitalise on this, CPR AM has launched CPR Global Infrastructures, an equity theme fund covering both developed markets and emerging markets, which benefit from specific drivers: demographic and economic growth on one hand, and the "green revolution" on the other.
Regardless of what phase of the economic cycle they are in, developed and emerging markets are undertaking infrastructure investment programmes concerning primarily long-term projects and assets such as motorways, railway lines, airports and electricity. "The United States is also close to launching a major road, air and rail infrastructure investment plan representing a total of around 50 billion dollars," comments Cyrille Collet, Head of Equity Investment Management at CPR AM. This pro-active approach by the majority of developed markets aims both to stimulate the economy and to benefit in the long term from the advantages offered by these new facilities, particularly with a view to addressing environmental issues such as building renovation and developing new energy sources.
Emerging markets, meanwhile, have significant structural needs, particularly in terms of transport, telecommunications networks, energy and social infrastructure. For example, in 2009, the Chinese government launched the world’s largest ever stimulus plan - representing 586 billion dollars over two years - more than half of which was dedicated to the development of new infrastructure such as roads, airports and high-speed rail networks.
Over the last few years, we have seen a change of leadership in infrastructure service providers, primarily with the emergence of companies from emerging markets such as Cemex in Mexico (cement), Hyundai Engineering in South Korea (construction and engineering), Lenovo in Chine and even Acer in Taiwan (technology).
Global needs in terms of infrastructure and sustainable development are therefore giving rise to a number of public and private investment projects over the long term. "In developed markets, due to their level of debt, investment in infrastructure projects is likely to result in a significant increase in partnerships with private companies, which will make the most of the return on investment (motorways, car parks, private clinics etc.)," states Cyrille Collet.
Several figures also confirm that this momentum is set to continue over the next few years. According to the OECD, 42 trillion euros will be needed to meet the global population's infrastructure requirements between now and 2030. Meanwhile, the World Bank expects worldwide investment in infrastructure projects to total 15 trillion euros within the next twenty years, still well below global requirements.
"Furthermore, the theme of infrastructure investment presents structural growth that is not highly dependent on economic cycles. In this respect, it offers additional diversification relative to other asset classes, including equities. For the years ahead, investment in infrastructure projects therefore makes complete sense," concludes Cyrille Collet.
Additionally, CPR AM is launching CPR Global infrastructures to make the most of this asset class. To do this, the fund focuses on dynamic allocation between developed market equities - to benefit from the themes of renovation and transformation (defensive and value stocks) — and emerging market equities — to benefit from the themes of construction and creation (growth stocks). "We are calibrating our balance between developed markets and emerging markets according to valuation levels and the potential in terms of economic repercussions of investment in infrastructure projects," explains Cyrille Collet.
The CPR Global Infrastructures fund favours a deliberately broad sector-based approach, covering 23 sectors* related to the "infrastructures" theme ("heavy" infrastructure, energy, communications and social). From this broad investment universe, the final portfolio — which is well diversified, comprising 150 to 200 stocks — focuses on the most attractive stocks in each region and each sector.