6 October 2020

Infrastructure firms with merchant business models have witnessed the largest decline in annual total return due to the impact of the COVID-19 pandemic. Merchant infrastructure firms are exposed to some degree of market risk with revenue contracts typically contingent on end user demand and market prices.

Larger investors have experienced a larger decline in returns due to COVID-19 pandemic. Both large asset managers and large asset owners have performed worse than the Infra300 benchmark of unlisted infrastructure equities. Large asset managers would appear to have been over-invested in merchant infrastructure, which greatly suffered due to the COVID-19 lockdowns. The subsequent fallout in economic activities impacted large asset owners as they were over-allocated to large regulated corporates.

According to EDHECInfra (June 2020), COVID-19 has significantly impacted total returns for the transportation sector. In comparison to the average decline of 8% for all infrastructure sectors, the annual total return on ports, roads and airports has declined by 20.9%, 16.6% and 10.6% respectively.