The Q1 2020 release of the EDHECinfra unlisted equity indices catches the impact of the Covid-19 lockdown on hundreds of unlisted infrastructure companies in 22 countries as of March 31st 2020.
The Infra300 equity index, which is designed to capture the structure of the investable universe, is down at -6.37% on the quarter, very close to the Global Unlisted Equity Index which reports a weighted average return of -6.34%.
Both index includes a substantial exposure to the ‘merchant’ business risk bucket (TICCS-BR2) which was the most directly impacted by Covid-19 lockdown. The Merchant Infrastructure Equity Index returned -9.15%, while the Advanced Economies Unlisted Airport Index (equal weights) further slumped at -10.16% quarterly returns. The Unlisted Road Index (equal weights) reaches -13.67% for 2020Q1.
Despite lower base rates in most countries, discount rates (IRRs) have jumped by more than 80bp on average (50th centile) up to close to 250bp for the top of the distribution. The average unlisted infrastructure risk premia now stands at 6.84%, substantially higher than at the end of 2019 .
The EDHECinfra equity style indices, which can report the performance of portfolios built by size quantiles for example, show that larger infrastructure assets have suffered more than smaller ones (which tend to be of the contracted type). The equally-weighted index for smaller size bucket is down by -3.5% this quarter while the larger size bucket index (4th quartile) is down -8.8% over the same period.
To produce these results, the EDHECinfra team of analysts conducted a firm-by-firm review of the impact of the Covid-19 lockdown on the future revenues of all major infrastructure affected by the crisis especially Merchant (TICCS/BR2) and Transport (TICCS/IC60) companies. The EDHECinfra asset pricing technology allowed estimating the quarter-on-quarter increase in risk premia from available market inputs in order to produce a mark-to-market assessment of the value of each index constituent.
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