Despite Carillion collapse, alternative assets continue to provide opportunities
Infrastructure investors could benefit from the collapse of construction giant Carillion, according to Matt Hoggarth, Head of Research at Thesis Asset Management.
Carillion was one of the major contractors working on government Private Finance Initiative schemes, but went into liquidation in January following multiple profit warnings throughout 2017.
However, Hoggarth believes that while the collapse has been concerning, it does present investors with opportunities when it comes to alternative assets, in particular commercial property and infrastructure.
“Compared to bonds, we are more positive about the yields available from commercial property and infrastructure, believing that these areas remain well supported by demand. Companies continue to require space for expansion, while government deficits mean that private financing of infrastructure remains an attractive way of providing services and transport links without increasing borrowing,” he said.
“The collapse of Carillion has had a limited impact on our fund selections as they are more conservatively managed, but it does potentially bring about some benefits. There is a possibility that infrastructure investors could profit from Carillion’s demise, as its contracts are auctioned to other providers, potentially at higher yields.”
Thesis currently has exposure to project infrastructure through International Public Partnerships Trust and 3i Infrastructure, alongside equity infrastructure via the Legg Mason RARE Global Infrastructure fund, and a balanced approach through the VT Gravis UK Infrastructure Income fund.
Elsewhere in the alternative assets market, Hoggarth noted that conditions have been challenging for hedge funds over the last year, with low market volatility offering few opportunities for more conservative funds to generate returns.
“We are shifting our focus in this area from funds which seek to provide absolute returns to those which have the potential to generate uncorrelated returns but with a wider potential range of outcomes.”