1
00:00:03,560 --> 00:00:06,040
Speaker 1: Welcome to Ask Fear and Greed, where we answer questions

2
00:00:06,040 --> 00:00:09,920
Speaker 1: about business, investing, economics, politics and more. I'm Michael Thompson

3
00:00:10,440 --> 00:00:11,920
Speaker 1: and hello, Sean Alma.

4
00:00:12,080 --> 00:00:13,440
Speaker 2: Hello Michael Shaw.

5
00:00:13,440 --> 00:00:19,640
Speaker 1: On something a little bit scintillating, a little bit sexy today. Infrastructure?

6
00:00:20,000 --> 00:00:25,159
Speaker 2: Sure, oh, is there not a more scintillating word in

7
00:00:25,160 --> 00:00:27,600
Speaker 2: the English language? And infrastructure?

8
00:00:27,640 --> 00:00:29,520
Speaker 1: If there is, I'm yet to find it, Sean. And

9
00:00:29,560 --> 00:00:35,240
Speaker 1: the question today is why are infrastructure assets seen as

10
00:00:35,640 --> 00:00:39,640
Speaker 1: safe in inverted commas investments.

11
00:00:39,880 --> 00:00:41,919
Speaker 2: Because they're not sexy?

12
00:00:42,360 --> 00:00:44,760
Speaker 1: Michael, I suppose that's actually a really good way to

13
00:00:44,800 --> 00:00:47,320
Speaker 1: put it. It is not a huge amount sexy about

14
00:00:47,320 --> 00:00:51,600
Speaker 1: a toll road or an airport or a nice name.

15
00:00:52,360 --> 00:00:55,680
Speaker 2: So for most people investing, we'll talk about managed funds

16
00:00:55,720 --> 00:00:59,960
Speaker 2: which invest in infrastructure, all listed infrastructure, things like Trends,

17
00:01:00,080 --> 00:01:04,600
Speaker 2: Urban at Las, Arteria. They're big toll road companies here

18
00:01:04,600 --> 00:01:10,319
Speaker 2: in Australia. Mostly it's because they are actually boring. That's

19
00:01:10,360 --> 00:01:12,720
Speaker 2: why they have these people like them, because they have

20
00:01:12,800 --> 00:01:16,080
Speaker 2: what they call defensive characteristics. No matter what's going on

21
00:01:16,120 --> 00:01:19,880
Speaker 2: in the world, they just plod along, continue growing, continue

22
00:01:19,920 --> 00:01:25,479
Speaker 2: doing their thing. Really predictable cash flows. So toll roads,

23
00:01:25,520 --> 00:01:29,760
Speaker 2: for example, people that cross you know, a bridge or

24
00:01:30,440 --> 00:01:34,000
Speaker 2: major freeway, they tend to do it the same number

25
00:01:34,000 --> 00:01:36,360
Speaker 2: of times every week, people driving to work on it,

26
00:01:36,400 --> 00:01:42,080
Speaker 2: so really stable cash flows. Often these cash flows are

27
00:01:42,120 --> 00:01:45,479
Speaker 2: inflation linked, so when we had a breakout of inflation,

28
00:01:46,280 --> 00:01:49,520
Speaker 2: people end up paying high tolls. For example. These are

29
00:01:49,840 --> 00:01:53,680
Speaker 2: very government backed, so sometimes in the energy area and

30
00:01:53,880 --> 00:01:58,960
Speaker 2: utilities area, government determines how much prices can increase, but

31
00:01:59,000 --> 00:02:02,560
Speaker 2: they do increase them. Often they're linked to inflation, so

32
00:02:02,800 --> 00:02:05,760
Speaker 2: they've got a good cash flow. Inflation linked revenue streams.

33
00:02:06,280 --> 00:02:10,639
Speaker 2: They don't correlate that well to broader equities, So when

34
00:02:10,639 --> 00:02:14,960
Speaker 2: you buy stocks, you actually want some that go up

35
00:02:15,000 --> 00:02:16,960
Speaker 2: when others go down and some that go down when

36
00:02:17,040 --> 00:02:18,680
Speaker 2: others go up. Well, you probably never want them to

37
00:02:18,720 --> 00:02:21,200
Speaker 2: going down, to be perfectly honest, but you don't want

38
00:02:21,240 --> 00:02:23,880
Speaker 2: them all always going in the same direction because if

39
00:02:23,919 --> 00:02:26,400
Speaker 2: you have that the one you know, if they're going down,

40
00:02:26,480 --> 00:02:28,280
Speaker 2: they're all going down. You're not doing so well. So

41
00:02:28,520 --> 00:02:31,840
Speaker 2: kind of even within an equity portfolio, you want defensive stocks,

42
00:02:32,240 --> 00:02:35,160
Speaker 2: and that's where listed infrastructure do a really really good

43
00:02:35,280 --> 00:02:41,560
Speaker 2: job and just kind of whole sort of structure of

44
00:02:42,080 --> 00:02:46,680
Speaker 2: public money to infrastructure governments spend money on roads and

45
00:02:46,800 --> 00:02:52,519
Speaker 2: schools and bridges and hospitals, so we know that this

46
00:02:52,960 --> 00:02:57,320
Speaker 2: that provides an enormous support for infrastructure. So they're just safe,

47
00:02:57,440 --> 00:02:57,800
Speaker 2: a lot.

48
00:02:57,720 --> 00:02:59,799
Speaker 1: Of stability, and so this is why then we see

49
00:02:59,800 --> 00:03:02,560
Speaker 1: so much money coming from the big super funds, the

50
00:03:02,560 --> 00:03:05,160
Speaker 1: big international pension funds that are all looking for these

51
00:03:05,200 --> 00:03:08,280
Speaker 1: infrastructure assets because it gives them stability over a longer

52
00:03:08,280 --> 00:03:09,000
Speaker 1: period of time.

53
00:03:09,760 --> 00:03:11,919
Speaker 2: Yeah, exactly right. I mean the great example at Sydney

54
00:03:11,960 --> 00:03:14,280
Speaker 2: Airport used to be listed on the AASEX. It was

55
00:03:14,320 --> 00:03:17,920
Speaker 2: purchased by a bunch of super funds because it's just stable.

56
00:03:18,360 --> 00:03:20,519
Speaker 2: So if you mean, they know what they're going to

57
00:03:20,560 --> 00:03:24,720
Speaker 2: get out of Sydney Airport and so they took it

58
00:03:24,760 --> 00:03:27,000
Speaker 2: off the course and that's what they're getting. And so

59
00:03:27,120 --> 00:03:29,760
Speaker 2: the members of those super funds are benefiting from it.

60
00:03:29,800 --> 00:03:33,200
Speaker 2: They're just stable. Is boring, Michael boring?

61
00:03:33,400 --> 00:03:37,760
Speaker 1: Is there only a relatively limited number of assets available

62
00:03:38,040 --> 00:03:40,960
Speaker 1: in infrastructure and not so much limited, but I mean

63
00:03:41,000 --> 00:03:43,440
Speaker 1: they're not exactly something that you can just whip up overnight.

64
00:03:43,560 --> 00:03:46,200
Speaker 1: You can't just quickly whip up a new airport or

65
00:03:46,240 --> 00:03:48,560
Speaker 1: a new kind of toll road or something. These are

66
00:03:49,040 --> 00:03:51,760
Speaker 1: It feels like there's also not a great amount of

67
00:03:51,880 --> 00:03:53,720
Speaker 1: change happening within that space.

68
00:03:54,440 --> 00:03:57,840
Speaker 2: Yes, to some extent, you could argue that things like

69
00:03:57,920 --> 00:04:02,640
Speaker 2: poles and wires infrastructure. We need a lot of those

70
00:04:02,680 --> 00:04:06,600
Speaker 2: to carry renewable energy from wind farms and solar farms.

71
00:04:06,960 --> 00:04:09,520
Speaker 2: So that's a really hot area of infrastructure at the moment,

72
00:04:09,920 --> 00:04:14,720
Speaker 2: and that's not unlimited, but there's a huge demand for

73
00:04:14,800 --> 00:04:18,960
Speaker 2: it still, so certain areas, I mean around AI. Now

74
00:04:19,000 --> 00:04:23,599
Speaker 2: it depends how you think about data centers, but some

75
00:04:23,640 --> 00:04:27,599
Speaker 2: could argue they become essential infrastructure and there'll be plenty

76
00:04:27,640 --> 00:04:30,840
Speaker 2: of demand for that. I agree, like roads and bridges,

77
00:04:30,920 --> 00:04:33,520
Speaker 2: and they all have to be upgraded and new roads

78
00:04:33,640 --> 00:04:36,520
Speaker 2: come as you develop new areas, but that's probably a

79
00:04:36,600 --> 00:04:39,000
Speaker 2: bit more boring. You don't get many new airports, I mean,

80
00:04:39,000 --> 00:04:41,440
Speaker 2: there is one being developed in Western Sydney at the moment.

81
00:04:42,760 --> 00:04:50,599
Speaker 2: So many classes within infrastructure, there is a limited opportunity.

82
00:04:51,000 --> 00:04:53,200
Speaker 2: But then there are some of those growth areas that

83
00:04:53,279 --> 00:04:55,880
Speaker 2: we're talking about, poles and wires, data centers, that type

84
00:04:55,880 --> 00:04:56,159
Speaker 2: of thing.

85
00:04:56,440 --> 00:05:00,600
Speaker 1: There really is something quite there, actually is something quite appealing,

86
00:05:01,520 --> 00:05:04,720
Speaker 1: something sexy, something sexy about certain types of infrastructure, like

87
00:05:04,800 --> 00:05:08,640
Speaker 1: an airport that is. Yeah, that's pretty cool. A desalination

88
00:05:08,880 --> 00:05:10,800
Speaker 1: plant sean oh yes.

89
00:05:10,960 --> 00:05:15,279
Speaker 2: Detail plans very popular during droughts, not very popular in

90
00:05:15,320 --> 00:05:15,920
Speaker 2: non droughts.

91
00:05:16,560 --> 00:05:19,080
Speaker 1: Plants the extraordinary cost of keeping them running.

92
00:05:19,440 --> 00:05:23,240
Speaker 2: The other thing about them, they're really long concessions, so

93
00:05:23,960 --> 00:05:26,080
Speaker 2: people might have a ninety nine year concession on this

94
00:05:26,440 --> 00:05:30,080
Speaker 2: and ownership of an infrastructure as it that's really impealing

95
00:05:30,160 --> 00:05:31,320
Speaker 2: to investors as well.

96
00:05:31,800 --> 00:05:33,600
Speaker 1: I love the way you brought that back around from

97
00:05:33,600 --> 00:05:36,200
Speaker 1: me trying to list sexy infrastructure and you actually brought

98
00:05:36,240 --> 00:05:38,880
Speaker 1: it back to something that gives value to people listening

99
00:05:38,880 --> 00:05:41,520
Speaker 1: to this. So well done, and thank you for saving me.

100
00:05:41,880 --> 00:05:43,120
Speaker 2: Not at all, Michael, anytime.

101
00:05:43,200 --> 00:05:45,040
Speaker 1: All right, if you've got your own question that you

102
00:05:45,080 --> 00:05:47,360
Speaker 1: would like to ask them, please send it on through

103
00:05:47,520 --> 00:05:50,720
Speaker 1: via the website Fearangreed dot com dot au or jump

104
00:05:50,800 --> 00:05:52,880
Speaker 1: onto any of the social media platforms and send it

105
00:05:52,920 --> 00:05:55,680
Speaker 1: through there. I'm Michael Thompson and this was asked Fear

106
00:05:55,680 --> 00:05:56,080
Speaker 1: and Greed