Infrastructure Market Outlook: In conversation with Nick Scullion, Head of Foresight Capital Management

In our latest Infrastructure Market Update Nick Scullion, Head of Foresight Capital Management and Lead Fund Manager for Foresight's Global Real Infrastructure Fund (GRIF), discusses the current market outlook for infrastructure.

In light of the pandemic, infrastructure as an asset class has performed very well overall. Now, investors are returning to the markets cautiously and are increasingly looking for asset classes that have demonstrated defensive characteristics.

If you have any questions or would like to discuss an investment opportunity, please contact us on +44(0)20 3667 8199 or email sales@foresightgroup.eu.

Read the full transcript here

Annabel

Hello, and welcome to our latest infrastructure market update. I'm Annabel, Senior Marketing Manager at Foresight group. Today I'm joined by Nick Scullion who is Head of Foresight Capital Management and Lead Fund Manager on the FP Foresight Global Rail Infrastructure Fund, which is more simply known as GRIF. Thanks for joining me Nick.

Nick

Great to see you Annabel.

Annabel

It's definitely nice to see a familiar face. Should we start with talking about the state of infrastructure in the current market? How has infrastructure as an asset class fared over the last few months?

Nick

Absolutely. Infrastructure overall has performed very well. Clearly during February and March, like all asset classes, There was, there was a, somewhat of a selloff, driven by the search for liquidity. We have seen a very strong recovery from real assets driven by government backed index, linked cash flows. I think it's an encouraging time for the infrastructure in this market and it's been proven in the last few months.

Annabel

Great. So that makes sense. Can we just talk about that a bit more? We obviously saw a lot of investors, convert their assets to cash. Do you think they're ready to come back to the market and if so, what are they looking for in that market?

Nick

Yeah, we certainly saw the dash for liquidity in February and March. We have seen some investors come back to the markets to participate in the recovery since. However, we do expect even more investors to start to return to the market. We conduct a proprietary survey at Foresight Group. We rerun it every few months. What we found this time was that investors are increasingly looking for infrastructure for its defensive characteristics, for its resilience of income from those real physical assets that we're talking about. About 10% more than in December 2019, are looking for infrastructure as an asset class.

Annabel

Wow. That’s quite a lot. GRIF's obviously in a good place then.

Nick

Yeah, I think, GRIF is a really good place from an asset class perspective. I think the focus on sustainable real assets, renewable energy, social assets, such as health care and hospitals, schools, pharmacies, those types of assets are really well positioned to do well in this environment. I think the defensiveness from having governments as the ultimate counterparty is attractive at this point in the credit cycle. I think that we are well positioned to give investors the defensiveness and the income that they're looking for.

Annabel

Obviously we've got a lot of a big focus on sustainability and renewable energy in our funds. There have been a lot of changes in energy prices recently. Can you explain a bit more about that?

Nick

Yeah, the dynamic with energy prices in many markets at the moment is characterized by falling, for the next few years, at least. What that does is it makes traditional fossil fuel plants more competitive with renewables. However, the good news there is that innovation is happening at a rapid pace. We’re seeing innovation across the renewable generation space across storage, across grid efficiency and management and electric vehicle, automation and so on. However I think that some of the most compelling investment opportunities sit within of the more mainstream renewable energy asset classes. Storage, I think, is going through a step change in efficiency at the moment, wind and solar, both going through efficiency, projects of their own. We were set to see some of the largest installations offshore wind this year, which I think is really exciting.

And, and our infrastructure fund is a very way of getting exposure to some of that innovation.

Annabel

Fantastic. Well, thank you very much for joining me and breaking out of your COVID bubble, and hopefully see you again soon.

Nick

Thanks Annabel.