Australian Japan Business Co-operation Committee Wikramanayake AJBCC Presentation.pdf · World...
Transcript of Australian Japan Business Co-operation Committee Wikramanayake AJBCC Presentation.pdf · World...
STRICTLY CONFIDENTIAL
Australian Japan Business Co-operation CommitteeViewing Change as Opportunity:
Financial Connection
Ms Shemara WikramanayakeHead of Macquarie Asset Management
9 October 2017
PAGE 1STRICTLY CONFIDENTIAL MACQUARIE
Wealth Managers
Banks
Insurers
Asset Managers
Identify, shape, de-risk, and add value to investment opportunities
The Financial Connection – connecting capital to investment opportunities
Capital
(from savers
and nations)
Investment
opportunities
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Changes driving investing environment
Demographics
Geopolitics
Technology /
Disintermediation
Regulation
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Quantitative Easing has driven inflation of financial asset values and low volatility but this tailwind is abating
Source: US Federal Reserve
-
500
1,000
1,500
2,000
2,500
-
1.0
2.0
3.0
4.0
5.0
2008 2011 2014 2017
Today’s investing environment
Federal Reserve
assets (LHS, $tn)
S&P 500 (RHS)
S&P500 vs US Federal Reserve balance sheet
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Source: Brad DeLong & Angus Maddison (LHS), United Nations (RHS)
Middle Cohort Population GrowthWorld Population and Economic Growth Outlook
The global “new normal” appears to be an ongoing decline in population and economic growth
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
1950 1980 2010 2040 2070 2100
World
Po
pu
latio
n G
row
th
Worl
d G
DP
Gro
wth
Tre
nd
World GDP GrowthTrend (LHS)
World PopulationGrowth (RHS)
-1.5%
-1.0%
-0.5%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
1950 1980 2010 2040 2070
Po
pu
latio
n G
row
th
Period Beginning
Japan
Europe
China
UK
USA
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-5.00%
-2.50%
0.00%
2.50%
5.00%
7.50%
10.00%
1999 2001 2003 2005 2007 2009 2011 2013 2015 2017
Annual Return Yield
Yield on 10-year JGBs has been at zero for many years
Zero Yield Policy
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OECD pension fund assets grown by ~150% in the past 14 years
Source: OECD
10.8 10.3
12.614.0
15.016.7
18.5
14.516.5
18.420.0
21.7
24.1 24.0 24.8
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Yet global savings continue to grow, with increasing deployment challenges
OECD pension fund assets
($UStr)
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Investors continue high exposure to defensive, lower return investments
Source: Willis Towers Watson and secondary sources
1. 1 DC assets in Switzerland are cash balance plans where the plan sponsor shares the investment risk and all assets are pooled. There are no pure DC assets where members make an investment choice and receive market returns on their
funds. Therefore, Switzerland is excluded from this analysis.
2. 2 In January 2017, the UK’s Office for National Statistics stated that the figures previously disclosed for DC entitlements were significantly overestimated. As a result there is a significant decrease in UK DC pension assets this year when
compared to the previous editions of this study. This change has a very limited impact on the P7 DC assets; in the order of a one percent reduction.
DB/DC Split 20161,2Asset allocation 2016
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0
200
400
600
800
1,000
1,200
1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017
Japan Offshore
Japanese investment in JGBs
(¥JPYtr)
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Source: Macquarie and Bloomberg. For the US based on S&P 500 Index and 10 year US Treasury Bonds, for Japan based on the Tokyo Stock Exchange Price Index and 10 year Japanese government bonds. For Australia based on Australian
All Ordinaries index and 10 year Australian Commonwealth Government Bond
2007 Japan - 19891987
Risk aversion is a contributing factor
68
212317
Australia US
72
53
40 38
Australia US
287
Months to recover from a crisis: 100% Equities / 60% Equities 40% Bonds
Still Counting
Nikkei is still not back to its 1989 levels
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-1%
0%
1%
2%
3%
4%
5%
-4%
0%
4%
8%
12%
16%
20%
1822 1834 1846 1858 1870 1882 1894 1906 1918 1930 1942 1954 1966 1978 1990 2002 2014
Equity risk premium World GDP trend (RHS)
U.S. equity risk premium vs. GDP trend
Reward for risk is decreasing in traditional asset classes
Source: Bloomberg, April 2016
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Our industry’s role is to shape higher return investment opportunities for risk
Capital
(from savers
and nations)
Investment
opportunitiesWealth Managers
Banks
Insurers
Asset Managers
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The largest contributor to world economic growth is now Emerging Markets
-4
-2
0
2
4
6
1991 1994 1997 2000 2003 2006 2009 2012 2015
%
Emerging Markets Growth Developed Markets Growth World growth
China Growth US Growth EU Growth
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Source: IMF, MSCI, Macquarie Investment Management
Real GDP growthMSCI Emerging markets benchmark breakdown
What are you getting in Emerging Markets?Asia is a key opportunity
Asia (ex- Japan)
73%
Non-Asia27%
EmergingMarkets
Non-Asia EM Asia ex-Japan
4.5%
1.9%
6.0%
Growth
gap
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Travel, language and culture are a significant barrier
Source: Bloomberg
You need to be “on the ground” in Asia
Morgan Stanley
Capital International
World
75% in three countries
75% in 2 languages
Easy to cover from
anywhere in the world
The “western approach”
works
Asia ex-Japan
11 countries
1,419 cities
Many languages and
dialects
Vast cultural differences
US
UK
JapanAsia
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1. IMF WEO Database as at 9 December 2016
2. United Nations Department of Economic and Social Affairs: World Urbanization Prospects
3. EY: Hitting the sweet spot - The growth of the middle class in emerging markets (middle class defined as earning $US10-100 per day)
4. World Bank: Global Saving in 2030, World Bank: Capital for the Future - Saving and Investment in an Interdependent World
Urbanisation2
Middle class population3 Total savings4
Share of global GDP1
Asia’s positive long-term outlook will drive infrastructure demand
63% 50%
37% 50%
0%
25%
50%
75%
100%
2015 2030FAsia Global ex-Asia
1.2
3.2
45% 66%
0b
1b
2b
3b
4b
2015 2030F
Population % of Global middle class population
2.12.8
48% 56%
0b
1b
2b
3b
2015 2030FUrban population % of Asian population
6.712.7
34%44%
$0tn
$4tn
$8tn
$12tn
$16tn
2015 2030F
Savings % of Global savings
640 million
people
By 2030:
1 billion people
in China
475 million
people in India
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7.0 Transport
0.7 Water/Sanitation
2.0 Telecommunications
1.5 Renewables
9.0 Electricity
1. Asian Development Bank: “Meeting Asia’s Infrastructure Needs”, 2017; International Energy Agency: World Energy Outlook 2015
Asia Infrastructure Projected Demand for
Capacity and Replacement (2016-2030)1
Infrastructure in Asia will require substantial capital
$20.2 trillion $13 trillionfrom China alone
$4 trillionfrom India
$3 trillionfrom Southeast Asia
Of the $20.2 trillion projected demand…
Resulting to an infrastructure funding gap of
$3-4 trillion
Augmented by robust brownfield opportunities, as a
result of
Non-core asset sales and capital
recycling for new infrastructure
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Benefits to InvestorsCharacteristics of Infrastructure assets
Why we like Infrastructure Assets
Stable returns
and low volatility
High yielding
Inflation linkage
Resilient performance
in different economic environments
Monopolistic
position
High barriers
to entry
Allowed return
often set by regulation
Essential services
to the community
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Investors’ needs from their investment portfolios vary
Sub-sector
Long duration Shorter
OECD Emerging markets
Yield Growth
Returns / Risk
Debt / Mezz Super Core Core Core-Plus
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Making Opportunity from Change
Collaborate
Use innovative
partnerships to access
appropriate skill and
pricing
Be pro-active
Embrace complex
assets and situations
Be selective
Participate where
competitive edge is
clear and there is deep
understanding of the
asset
Adapt
Create tailored
solutions for
counterparties
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United States
■ Atlantic Aviation
■ Aquarion Company
■ Bayonne Energy Center
■ Broadrock Renewables
■ Cleco Corporation
■ Dulles Greenway
■ Elizabeth River Tunnels
■ Goethals Bridge
■ Harley Marine Services
■ InSite
■ International-Matex Tank
Terminals
■ Leaf River Gas Storage
■ Lordstown Energy Center
■ Maher Terminals
■ MIC Renewable Energy
Holdings
■ MIC Hawaii
■ NYK Ports
■ Penn Terminals
■ Puget Energy
■ Red Hills Solar
■ Waste Industries
■ WCA Waste
135
portfolio
businesses
~300
properties
~4.5 million
hectares of
farmland
1. As at 30 June 2017. Represents portfolio businesses which Macquarie Infrastructure and Real Assets manages on behalf of investors with various direct percentage stakes held in each. Portfolio businesses shown on the map are
representative and not exhaustive. In some instances they represent the operations of a single business where it has operations across different countries.
Macquarie Infrastructure and Real Assets Global Presence1
Italy
■ Hydro Dolomiti
■ Renvico
■ Societa’ Gasdotti
Italia S.p.A. Roads and Rail
Renewable Energy
Other Transport Services
Real Estate
Communications
Airports
Other Real Assets
Energy
Utilities
Waste
Agriculture
Canada
■ Autoroute 25
■ Fraser Surrey Docks
■ GFL Environmental
■ Halterm Limited
Mexico
■ Concesionaria Universidad
Politécnica
■ Decarred
■ FIBRA Macquarie México
■ Mexican Tower Partners
■ Parque Solar Coahuila
■ San Rafael HydroGen
Brazil
■ Cruzeiro do Sul Grãos (3 farms)South Korea
■ AJ Parking Tower
■ Baekyang Tunnel
■ Busan New Port Phase 2-3
■ Cheonan-Nonsan Expressway
■ CNE Motorway Service
Stations
■ Daegil Industry / Daegil
Environment
■ Daejon Cogeneration
■ DB Hotel
■ Deok Pyeong Land Company
LLC
■ D’LIVE
■ Goyang Bus Terminal
■ Gwangju 2nd Beltway Section
1
■ Gwangju 2nd Beltway Section
3-1
■ Hangdarm Island
■ Hanjin Pacific Corporation
■ Incheon Airport Hotel
■ Incheon Grand Bridge
■ Incheon International Airport
Expressway
■ Jinju
■ Koentec
■ Machang Bridge
■ Moda
■ North East Chemical
■ Parking Tower II
■ Pyeong Chang Motorway
Service Station
■ Saehan Environment Co.
■ Seoul Chuncheon
Expressway
■ Soojungsan Tunnel
■ United Terminal Korea Limited
■ Woomyunsan Tunnel
■ Yeongyang Wind Power
■ Yongin-Seoul Expressway
■ Youngduk Wind Power
Russia
■ Brunswick Rail
■ GSR Energy Investments
■ OGK-5
■ Russian Towers
China
■ Dallan Hengji Xinrun Water
■ Hengyang Holdings
■ Jinko Solar Power
Engineering
■ Longtan Tianyu Terminal
■ Mosaic Xi’an
■ Mosaic Beijing
■ Mosaic Qingdao
■ Mosaic Shanghai
■ Mosaic Chongqing
■ Shenyang Water Treatment
Co.
■ Shenyang Zhenxing
Environmental Protection
■ Star King
■ Tianjin Port Huisheng
Terminal
■ Zhenxing Wastewater
Philippines
■ GNPower Kauswagan
■ LRT 1 Metro
■ Negros Island Solar Power
■ NLREC Wind Farm
■ Philippine Coastal Storage &
Pipeline
■ San Carlos Solar Energy
Australia
■ Axicom Group
■ Endeavour Energy
■ GWA
■ Hobart International Airport
■ Lawson Grains (10 farms)
■ MREEFs
■ Paraway Pastoral (23 farms)
■ Prospect Water
New Zealand
■ Oceania Healthcare
Taiwan
■ Hanjin Pacific Corporation
Japan
■ Central Tank Terminal
■ Hanjin Pacific Corporation
United Kingdom
■ AGS Airports
■ Arqiva
■ Cadent
■ Calon Energy
■ Condor Group
■ M6 Toll
■ National Car Parks
■ Race Bank
Spain
■ Compania
Logistica de
Hidrocarburos
■ Viesgo
Sweden
■ Arlanda Express
Belgium
■ Brussels Airport
Germany
■ Open Grid Europe
■ TanQuid
■ Techem
■ Warnow Tunnel
France
■ APRR
■ Pisto SAS
■ Renvico
Poland
■ DCT Gdansk
■ TanQuid
Denmark
■ Copenhagen Airports
Slovakia
■ EP Infrastructure
■ Vector Parks
■ Towercom
Singapore
■ Universal Terminal
Austria
■ Energie Steiermark
India
■ Adhunik Power and Natural Resources
■ Ashoka Concessions
■ GMR Airports
■ Gujarat Roads & Infrastructure Corp
■ Ind-Barath Energy
■ MB Power
■ Soham Renewable Energy
■ Swarna Tollways Private Limited
■ Viom Networks
Portugal
■ Viesgo
Czech Republic
■ Vector Parks
■ Ceske Radiokomunikace
■ Czech Gas Networks
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Thank you.