Clarion call
The main strategy behind the CBRE Clarion fund is to provide investors with an attractive combination of stability, income and growth that may enhance the risk-adjusted return potential of a mixed asset portfolio.
The fund invests in a globally diversified portfolio of core listed infrastructure companies that own long-duration income-producing assets with stable demand and low volatility of inflation-linked cashflows.
It aims to benefit from the predictable growth of infrastructure assets, which is secured by the required investment in ageing infrastructure, as well as new investment in expanding global energy resources to respond to the political and social demands of a greener world.
Anagnos describes his investment process as one in which he looks first to allocate capital to sectors where there are attractive fundamentals and a promising regulatory outlook. Next, he picks stocks where cashflow stability is attractive on a risk-adjusted basis.
“We also have an assessment of the capital markets because these are very capital-intensive assets. You need to be able to access capital markets at an efficient price, and you need some level of capital to undertake that.
“We are looking for companies that can provide stable and growing cashflows, and where the risk profile is attractive. Generally, we want to invest in companies where the risk premium that the market is assessing for those cashflows is higher than the risk premium we would associate with them.
“We are looking for cases where the market is ‘over-discounting’ the cashflow potential of the stock we want to invest in.”
Performance promise
Using this process, Anagnos says he has identified several promising sectors in the current environment.
“The toll roads sector, in our view, has a good cashflow profile. The market seems to be discounting the risk related to potentially lower economic output, but we see that the profile for the usage of toll roads has been very stable and growing, and the companies are improving their operating performance within those toll roads.”
Another one on the list is the mid-stream infrastructure related to the transport of oil and gas. This is primarily a North American investment opportunity but Anagnos believes the market has become overly concerned about the outlook for oil production.
“That sentiment has weighed heavily on stocks, even those that had owned the assets. We have continued to see good performance at the asset level, despite stock prices that had corrected substantially,” he says.
“We’ve had a more positive view on the outlook there, given a risk adjustment in the outlook versus what we continue to see as pretty good, stable cashflows.”
Anagnos also likes the tower sector within the communications industry. These are companies that own the cellphone towers that bounce signals from all the world’s mobile and, increasingly, stationary internet-connected devices.
“Increasingly, this world is becoming wireless and data-centric. Not just the phones we use but our refrigerators and all the gadgets in our house are talking wirelessly. As a result, we see data usage continuing to grow.”
Anagnos believes these companies have very dominant positions in their markets and will see increasing demand for the equipment that gets put onto their towers by the various carriers. “That leads to growth opportunities for them, and rising rents or contract cashflows, so we have a positive view on that sector as well,” he says.
Thought leadership
Anagnos started his career in real estate before entering infrastructure investment.
“I started in the US and went on to invest in European Reits in 2000. I lived in Europe, for about seven years, and then did global investing in real estate securities,” he says.
“We were being approached by our pension fund clients to look more broadly at real asset investment, and to include infrastructure. So I took on the leadership of building a team here, a process we started just over five years ago.
“I thought it would be very stable and unexciting but there is a constant dynamic of change in relation to the regulatory and political forces that influence infrastructure.”
Biography
Jeremy Anagnos is the CBRE Clarion Infrastructure chief investment officer and a member of the Management and Global Investment Policy committees.
Prior to joining CBRE Clarion in 2011, he served as co-chief investment officer of CB Richard Ellis Investors’ Securities Team, responsible for portfolio management of global real estate securities.
