Autumn 2015October 2015
Equity betas of listed infrastructure funds are very low which reflect the stable cash flows and low asset betas of the underlying projects. Ninety-eight percent of the volatility is from unsystematic risk due to the sector's low correlation to the business cycle. Portfolio risk from infrastructure debt can be diversified away more easily than portfolio risk from leveraged loans, where there is higher systematic risk.
Winter 2014 / 2015December 2014
UK local authorities have historically enjoyed a strong credit profile. The few that are rated are mostly in the AA category and none have ever defaulted. However, the framework for local authorities is changing, with discussion of devolving further powers to them, and their budgets are under continuing pressure. We have built a proprietary credit factor model to assess local authority credit strength. This assists us when selecting assets dependant on unitary availability payments from local authority governments.
Autumn 2014September 2014
Brief periods of deflation are a normal part of a business cycle and usually turn out to be just short periods of falling prices. Longer, drawn out periods of deflation are extremely rare. With the exception of Japan, all instances of past deflation were in countries with fixed exchange rate regimes.
Summer 2014August 2014
As infrastructure debt moves gradually from being substantially a banking monopoly to an established institutional asset class, many people have given consideration to the likely consequences for lending structures and terms, for example, fixed rate, bond versus loan format, fully drawn day one, higher credit quality and less prepayment flexibility.
Spring 2014March 2014
In March 2014, Moody’s published an update to its study of project finance and infrastructure loan performance. The study now covers a 30-year period and an estimated 54.2% of the asset class globally. It is one of the best sources of performance data for the asset class. The findings confirm broad infrastructure’s continued low default rate of 49 bps per annum (pa), high recoveries at 84.3% and very low loss rates of 7.7 bps pa.