tmmonline.nz  |   landlords.co.nz        About Good Returns  |  Advertise  |  Contact Us  |  Terms & Conditions  |  RSS Feeds

NZ's Financial Adviser News Centre

GR Logo
Last Article Uploaded: Monday, May 10th, 10:49AM

Investments

rss
Investment News

Dire Straits for Infrastructure Funds

One of the Cook Strait ferry operators, Strait Shipping, was mentioned in the news recently. Although it doesn’t feature in any of Castle Point’s investments, it did tweak our interest.

Tuesday, September 18th 2018, 8:00AM

by Castle Point Funds Management

Strait Shipping was established by Jim Barker in 1992, who needed a reliable and cost-effective way of moving his livestock between the North and South Islands.

Strait Shipping was what might be considered a ‘disrupter’, a new entrant with an offering capable of taking material market share from the incumbent. To truly qualify as a disrupter, the new entrant generally needs a different operating model, resulting in either a superior offer or a significantly lower price. 

In this case, not being owned by NZ Rail was enough. The ferry service underwent numerous changes in direction and in 2016 the Barker family sold to the Australian based Private Equity firm, Champ.

Several times every day most of the company’s assets, staff and customers are sent across the Cook Strait. We’re not talking about the levels of risk taken on by explorers crossing the Pacific in canoes, Christopher Columbus, or competitors in the Volvo Ocean Race, but neither are we running a business that delivers parcels, runs a seaport or airport, generates electricity from rain or manufactures cement and plasterboard.

This is a tough business. Volatile fuel costs are a significant input, the main competitor is state-owned and does not necessarily price commercially, weather events frequently lead to delays and even service cancellations.

And, if significant returns can ultimately be made, there is little to stop another crew (pun intended) buying another ferry and setting up in competition. Congratulations are indeed due to the Barker family.

More recently, Champ has brought on a co-investor, Macquarie Group. What tweaked our interest was Macquarie’s reported intentions for their new purchase.

The Macquarie infrastructure funds already own several ferry operators such as Condor Ferries, Wightlink, and an Isle of Man operation. The Strait Shipping entity is expected to be combined with these operations and marketed to “infrastructure-minded” investors.

An “infrastructure-minded” investor we suspect is expecting investments with reliable income characteristics, that have traditionally included the likes of airports, electricity networks, toll roads and seaports.

These assets are typically unique, expensive to build and have little competition, resulting in dependable long-term profits, often to the point that they are regulated.

In our opinion, a ferry operator is not an infrastructure investment. Compared to its transportation peers it is closer to an airline, a shipping company, or even a sub scale trucking company. It is the user of infrastructure, not infrastructure itself.

So, if you are considering an investment into an infrastructure fund or are perhaps an “infrastructure-minded” investor, it would pay to beware, the lines seem to be getting rather blurred.

Tags: Castle Point investment

« Perspective On Markets - It's An Age ThingInvesting: The Good-Bad-Good of Share Buybacks »

Special Offers

Comments from our readers

No comments yet

Sign In to add your comment

 

print

Printable version  

print

Email to a friend

Good Returns Investment Centre is brought to you by:

Subscribe Now

Keep up to date with the latest investment news
Subscribe to our newsletter today

Edison Investment Research
  • Hansa Investment Company
    6 May 2021
    Brazil – game-changer or sideshow?
    Hansa Investment Company (HAN/HANA) fund manager Alec Letchfield argues that investors should not be overly distracted by the fund’s exposure to...
  • Baillie Gifford China Growth Trust
    4 May 2021
    Year of a bull in motion
    Baillie Gifford China Growth (BGCG) is a recent entrant to Ballie Gifford’s (BG) house philosophy of investing alongside current trendsetters and...
  • Diverse Income Trust (The)
    29 April 2021
    10-year performance anniversary
    The Diverse Income Trust (DIVI) topped the ranking of UK high dividend yield closed end funds at its 10-year performance anniversary on par with one peer...
© 2021 Edison Investment Research.

View more research papers »

Today's Best Bank Rates
Rabobank 0.75  
Based on a $50,000 deposit
More Rates »
Cash PIE Rates

Cash Funds

Institution Rate 33% 39%
ANZ 0.10    0.10    0.11
ASB Bank 0.05    0.41    0.42
ASB Bank 0.05    0.59    0.56
ASB Bank 0.05    0.61    0.64
ASB Bank 0.08    0.66    0.69
ASB Bank 0.08    0.72    0.75
BNZ 0.10    0.10    0.10
Heartland Bank 0.40    0.40    0.40
Kiwibank 0.05    -    -
Kiwibank 0.25    -    -
Nelson Building Society -    -    -
SBS Bank -    -    -
TSB Bank 0.25    0.25    0.26
Westpac 0.35    0.36    0.38
Westpac 0.05    0.05    0.05
Westpac 0.35    0.36    0.38

Term Funds

Institution Rate 33% 39%
ANZ Term Fund - 90 days 0.35    0.36    0.37
ANZ Term fund - 12 months 1.00    1.02    1.07
ANZ Term Fund - 120 days 0.45    0.46    0.48
ANZ Term fund - 6 months 0.80    0.82    0.85
ANZ Term Fund - 150 days 0.55    0.56    0.59
ANZ Term Fund - 9 months 0.90    0.92    0.96
ANZ Term Fund - 18 months 1.00    1.02    1.07
ANZ Term Fund - 2 years 1.10    1.13    1.18
ANZ Term Fund - 5 years 1.40    1.44    1.50
ASB Bank Term Fund - 90 days 0.35    0.36    0.37
ASB Bank Term Fund - 6 months 0.80    0.82    0.85
ASB Bank Term Fund - 12 months 0.80    0.82    0.85
ASB Bank Term Fund - 18 months 1.00    1.02    1.07
ASB Bank Term Fund - 2 years 1.00    1.02    1.07
ASB Bank Term Fund - 5 years 1.75    1.81    1.89
ASB Bank Term Fund - 9 months 0.80    0.82    0.85
BNZ Term PIE - 120 days 0.45    0.45    0.47
BNZ Term PIE - 150 days 0.60    0.61    0.64
BNZ Term PIE - 5 years 1.40    1.44    1.50
BNZ Term PIE - 2 years 1.10    1.13    1.18
BNZ Term PIE - 18 months 1.05    1.08    1.12
BNZ Term PIE - 12 months 1.00    1.02    1.07
BNZ Term PIE - 9 months 0.90    0.92    0.96
BNZ Term PIE - 6 months 0.80    0.82    0.85
BNZ Term PIE - 90 days 0.35    0.35    0.37
Co-operative Bank PIE Term Fund - 6 months -    -    -
Heartland Bank Term Deposit PIE - 12 months 1.00    1.02    1.07
Heartland Bank Term Deposit PIE - 6 months 0.90    0.92    0.96
Heartland Bank Term Deposit PIE - 9 months 0.90    0.92    0.96
Heartland Bank Term Deposit PIE - 18 months 1.00    1.02    1.07
Heartland Bank Term Deposit PIE - 2 years 1.20    1.24    1.28
Heartland Bank Term Deposit PIE - 5 years 1.75    1.81    1.89
Kiwibank Term Deposit Fund - 90 days 0.35    0.36    0.37
Kiwibank Term Deposit Fund - 6 months 1.00    1.02    1.07
Kiwibank Term Deposit Fund - 12 months 0.85    0.87    0.90
Kiwibank Term Deposit Fund - 150 days 0.60    0.61    0.64
Kiwibank Term Deposit Fund - 120 days 0.45    0.46    0.49
Kiwibank Term Deposit Fund - 9 months 0.80    0.82    0.85
Westpac Term PIE Fund - 150 days 0.60    0.61    0.64
Westpac Term PIE Fund - 120 days 0.45    0.46    0.47
Westpac Term PIE Fund - 18 months 1.10    1.13    1.18
Westpac Term PIE Fund - 12 months 0.90    0.92    0.96
Westpac Term PIE Fund - 6 months 0.80    0.81    0.84
Westpac Term PIE Fund - 9 months 1.10    1.13    1.18
Westpac Term PIE Fund - 90 days 0.35    0.36    0.37
Westpac Term PIE Fund - 2 years 1.15    1.18    1.23
About Us  |  Advertise  |  Contact Us  |  Terms & Conditions  |  Privacy Policy  |  RSS Feeds  |  Letters  |  Archive  |  Toolbox
 
Site by Web Developer and eyelovedesign.com