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

STRICTLY 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


Changes driving investing environment

Demographics

Geopolitics

Technology /

Disintermediation

Regulation


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


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


-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


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)


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


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)


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


-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


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


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


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


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


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


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


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


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


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


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


Japan

■ Central Tank Terminal


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


Thank you.

australian japan business co-operation committee wikramanayake ajbcc presentation.pdf · world...

Documents