After three consecutive quarters of positive returns, infrastructure equity ended the year 2021 strongly at an all-time high.
The infra300® index, which tracks a representative global sample of unlisted infrastructure equity investments worth more than USD 250bn, breached the 9000-level after rising 4.58% in Q4 (local currency returns). In the full year 2021, the index returned 12.93%, approximately one-third of which can be attributed to the growth in valuations. The higher expected cash flows were the main driver behind this growth, which more than offset the impact of the increased discount rates.
At the sector level, the transport sector (TICCS® – IC60) recovered the most and contributed almost 40% of the infra300 return in 2021. The infraGreen® index (consisting of wind and solar companies) returned 7.28% on the year (in local currency) bulk of which was due to the high cash yield.
Recovery was also visible in the merchant business model (TICCS® BR-2) segment of the market, which contributed more than half of the infra300 return over the year. Looking at the corporate governance structures (TICCS® – CG), the largest 100 project financed companies in EDHECinfra universe have outperformed the overall infrastructure market in 2021 and returned 15.65%. The high-risk opportunistic companies, had a much better year with 19.21% return in 2021 (local currency), followed by 11.83% and 10.80% returns in the Core+ and Core segments of the market respectively.
However, it wasn’t the best year for Private infrastructure debt which ended 2021 in the negative territory. The average credit spreads reduced by more than 15bps across the entire EDHECinfra debt universe over the year, but the rising interest rates drove the yield-to-maturity 0.7 percentage points higher, thus dampening the debt valuations.
The infra300® Debt index returned -0.49% and -0.57% in Q4 and in 2021 respectively (local currency). This index represents the performance of the most recent senior debt instruments issued by the constituents in the infra300® equity index. It includes more than 350 senior debt instruments with a market capitalisation of almost USD 100bn. Long term debt index was affected the worst by the rise in yields because of its longer duration and returned -2.39% in 2021 (local currency).
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