Macquarie launches global infrastructure index – demonstrating sector’s growth and performance

20 June 2005

Macquarie Bank and global index provider FTSE Group (FTSE) today launched the world’s most comprehensive global infrastructure index, demonstrating the strong outperformance of the infrastructure sector against equity market benchmarks since 2000.

Calculated by FTSE, the Macquarie Global Infrastructure Index (MGII), is based on 258 stocks currently in the FTSE Global Equity Index Series, comprising companies principally involved in the management, ownership and or operation of infrastructure and utility assets.

The index is the first to capture the worldwide growth in both infrastructure, particularly from growth arising from PPPs and privatisation of existing government assets, and utilities (electric, gas and water). It provides investors and asset managers with the means of benchmarking infrastructure using a broader than currently available definition of one of the world’s fastest growing asset classes. The index incorporates sub-indices constituting listed infrastructure entities from geographic regions as well as a range of sub-indices divided by sector such as utilities and transportation services. It is expected to be used as the basis for creating a range of tailored infrastructure investment products.

David Rickards, Global Head of Equities Research at Macquarie Bank said since the beginning of 2000, the overall MGII has performed well ahead of the FTSE Global All Cap Index with a 10.4 per cent compound return, compared with a - 0.4 per cent compound return for world equities. “Over the past five years, the index has increased in size from $US465 billion to $US1,207 billion, demonstrating the increasing international awareness and support for infrastructure as an asset class,” Mr Rickards said.

“The strength of the infrastructure sector is that it is also not susceptible to the boom bust that can affect broader global equities; this was reflected between 2000-2002 when FTSE Global All Cap Index declined by 46 per cent, yet the MGII declined by just 14 per cent.”

Macquarie Global Infrastructure Index vs. FTSE Global All Cap Index ($US)

Source: Macquarie/FTSE Group, June 2005

“Growth in the sector can be largely attributed to infrastructure companies exhibiting attractive investment fundamentals and generally constituting long-term assets with predictable cash flows,” Mr Rickards said.

These companies also typically display a strategic competitive advantage, economies of scale and relatively inelastic demand, appealing to a broadening range of investor seeking:

• stable earnings from essential services 
• access to a unique investment class 
• an investment with low correlation to price fluctuations in other investment categories 
• diversification into infrastructure assets which often have long concession terms.

Paul Hoff, Managing Director, FTSE Asia Pacific commented, "FTSE is delighted to work with Macquarie to create a comprehensive index series covering an asset class which is attracting an increased level of investor interest around the globe. By using FTSE's cutting edge index design and calculation techniques, and using the new granular Industry Classification Benchmark (ICB), users of the Macquarie Global InfrastructureIndex will gain an objective and state-of-the-art tool to analyse this fast growing asset class. “

Macquarie Bank infrastructure analyst Scott Ryall said in particular the index was useful when comparing the performance of the overall MGII with its regional constituents. “Europe has performed particularly well as a region, as has Australia, reflecting the fact that both these regions have a broader range of assets listed. Utilities are well  represented across all regions, however economic and commercial infrastructure is better represented in Europe, particularly in water, roads and airports,” Mr Ryall said.

“We anticipate further strong growth in MGII to be underpinned by the global trend toward Public Private Partnerships (PPPs) and the continued privatisation of existing government assets. This will be especially evident as governments across Europe, the US and Australasia seek to maintain high levels of fiscal responsibility, at the same time establishing the infrastructure required to keep pace with community growth,” Mr Ryall said.

According to Mr Ryall, areas identified where this trend will be significant are:

• roads - continuing proposals for new toll roads in UK, Spain, Italy as well as new EU countries such as Hungary and Poland. In the US states such as Texas, Delaware and Virginia are developing both greenfield and brownfield projects
• airports - particularly in the EU and Asia where potential privatisations include Hungary, Czech Republic, Hong Kong, Singapore and India 
• telecommunications - the trend of government privatisations (eg in Hungary where the Government is selling its interest in Antenna Hungaria) is likely to continue in other EU countries. The sector also presents opportunities for mobile tower and satellite ownership to move from larger conglomerates to infrastructure companies.

The MGII can be accessed at: www.ftse.com/infrastructure

For further information, please contact:

Karen Smith
Corporate Communications Manager
Macquarie Bank
Tel: (44) (0) 20 7065 2420