Macquarie launches Global Infrastructure Fund

26 July 2004

Macquarie New Zealand is providing investors with an opportunity to invest in infrastructure projects and activities on an international basis with the launching here of its Macquarie Global Infrastructure Trust II (the Trust).

John Rowley, head of Macquarie New Zealand's Financial Services Group, says the Trust gives New Zealand investors access to the benefits of investing in global infrastructure under the management of Macquarie's specialist infrastructure team.

“The Trust is an unlisted Australian unit trust, and is expected to pay quarterly distributions which will be taxable at investors' marginal tax rate”, Mr Rowley said.

Mr Mark Ramsey, Executive Director of Macquarie's Infrastructure and Specialised Funds division in Sydney, says that infrastructure, as an asset class, has historically provided attractive returns, while also complementing the more traditional asset classes normally held in retail investment portfolios.

He says Australia's three most prominent unlisted infrastructure trusts, which invest in Australian infrastructure assets, have returned an average 13.6 per cent per annum since their inception (pre-tax, net of fees), over a period in which the Australian S&P/ASX 200 Accumulation index returned 8.7 per cent per annum¹.

“Macquarie is one of the largest infrastructure fund managers in the world. Our experience suggests that patronage assets such as toll-ways, airports, utilities and railway lines are linked to GDP growth with cash flows that can be predicted with a degree of certainty. For example, privatised airports often have “concession periods” of 50 years, or more, attached to their ownership and management rights.

“Infrastructure has delivered attractive investment returns at a time when equity markets have not performed as well and offers defensive attributes against the competitive pressures that most industries face. Globalisation has meant that manufactured goods can be produced in developing Asian countries for a fraction of the cost, hence the fall in prices for goods such as computers, TVs and consumer goods. The internet has further heightened competitive pressures on western companies.

“Contrast that with infrastructure assets. You cannot buy highways and airports or bridges over the internet, nor can you buy them from developing Asian countries to reduce their cost. Infrastructure is unique in that regard.

“Another major driver of these returns has been the rapid growth in private sector funding of infrastructure projects, previously funded by the taxpayers.

“Governments throughout the world have reduced infrastructure spending during the past 30 years which has led to a massive “infrastructure deficit”.

Globally, Macquarie estimates this deficit to be in the order of A$2,200 billion and this is just to catch up with what, in the past, would have been publicly funded and publicly owned investments.

“Governments are also under increasing pressure to keep budget deficits under control and to keep taxes down and global ageing populations mean there are more people relying on government support, but fewer paying taxes – leaving little alternative, but to turn to the private sector.

“California is estimated to have an infrastructure deficit of more than US$100 billion. South Korea has plans to spend more than A$140 billion over the next few years. And the United Kingdom currently has plans for more than $A200 billion in private sector financing projects.”

In a research report on New Zealand's infrastructure investment entitled “Greenlight For Growth”, released today, Macquarie estimates that under-investment in New Zealand of NZ$50 billion – equivalent to 40% of GDP – accumulated over the 1990s. To claw this back, the report says New Zealand needs to lift private infrastructure investment through so-called public-private partnerships (or ‘PPPs') in which private sector companies and governments jointly finance infrastructure projects². The Trust gives New Zealanders an opportunity to access overseas infrastructure projects, including PPPs, thereby gaining exposure to the potential diversification benefits which investing in infrastructure can provide.

Mr Ramsey says the underlying wholesale fund which the Trust will invest in will be specifically focussed on OECD countries (excluding Australia) plus Singapore and Hong Kong, to avoid the risks of investing in developing economies. The fund will as a matter of principle not invest in assets operating in competitive situations.

He says the term of the investment is anticipated to be 10 years from the date that the last investment is made and it is expected that all funds will be called within two years of the close of the offer period. Distributions are expected to be made quarterly, which will be taxable in New Zealand at the investor's marginal tax rate. Investors should seek their own independent taxation advice.

Macquarie has been managing infrastructure investments since 1996. It employs more than 350 infrastructure professionals and is the world's largest adviser to governments on infrastructure privatisations. Its infrastructure teams span 46 offices in 14 countries, manage more than A$12 billion in infrastructure funds, and invest in 60 infrastructure assets in 14 countries.

The minimum investment in the Trust is A$10,000, the offer closes on 31 August 2004 and the fund is aiming to raise A$40 million.

Because of the long term nature of the investment, interested investors should speak with their financial adviser to establish whether the Trust is suitable for them.

For further information please contact:

John Rowley
Head of Financial Services Group
Macquarie New Zealand Limited
Telephone +64 9 363 1459
Mobile +64 21 434 377

Mark Ramsey
Infrastructure and Specialised Funds
Investment Banking Group
Macquarie Bank Limited
Telephone +61 2 8232 6018
Mobile +61 414 374 901

Hamish Anderson
Marketing Manager
Macquarie New Zealand Limited
Telephone +64 9 363 1435
Mobile +64 21 513 431

Macquarie Investment Management Limited (MIML) ABN 66 002 867 003 is the responsible entity for the Macquarie Global Infrastructure Trust II (MGIFT II). MIML is not an authorised deposit-taking institution for the purposes of the Banking Act (Cth) 1959, and MIML's obligations do not represent deposits or other liabilities of Macquarie Bank Limited ABN 46 008 583 542. Macquarie Bank is a company incorporated in Australia and authorised under the Banking Act 1959 (Australia) to conduct banking business in Australia.

Neither Macquarie Bank Limited or any of its worldwide related bodies corporate (including MIML) are registered as a bank in New Zealand by the Reserve Bank of New Zealand under the Reserve Bank of New Zealand Act 1989. Macquarie Bank Limited does not guarantee or otherwise provide assurance in respect of the obligations of MIML.

Investments in the trust are not deposits with or other liabilities of Macquarie Bank Limited ABN 46 008 583 542 (the Bank) or of any Macquarie Bank Group company and are subject to investment risk, including possible delays in repayment and loss of income or principal invested. None of Macquarie Bank Limited, MIML or any of the other member companies of the Macquarie Bank Group guarantees the performance of the trust or the repayment of capital from the trust or any particular rate of return.

MGIFT II ARSN 108 891 532 is offered by MIML ABN 66 002 867 003. This advice is not personal advice. This advice has been prepared without taking account of your objectives, financial situation or needs. In deciding whether to acquire or continue to hold an investment, and before acting on this advice, you should consider the Product Disclosure Statement

(PDS) and assess, with (or without) your financial adviser, whether this product fits your objectives, financial situation or needs. Applications can only be made on the application form contained in the current PDS.

Any financial product advice provided by us is free of charge. We (MIML) may receive remuneration for distributing financial products issued by other Macquarie Bank group companies.