Know your TICCS®, understand your risks

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Know your TICCS®, understand your risks

2 minutes
March 4, 2020 12:30 pm

Infrastructure index provider EDHECinfra releases 2020 version of its industry-backed infrastructure investment taxonomy, which enables investors to build customised benchmarks reflecting the true risk exposures of their infrastructure portfolios.

Since its launch in 2018, The Infrastructure Companies Classification Standard or TICCS® has become an industry standard and is widely used by infrastructure investors to categorise their assets and better understand their risk. TICCS® is built using objective criteria including the business model, industrial activity and corporate structure of individual companies.

Today, EDHECinfra is releasing TICCS® 2020, following an industry-wide consultation between May and October 2019 that drew responses from 120 asset managers, asset owners, consultants and regulators. Some 70% of the respondents stated that TICCS® was clear and did not need changing. However, suggestions were also made to clarify definitions and new asset types have been added to the industrial activity pillar.

In January 2020, the 16-strong independent TICCS® Review Committee conducted a detailed analysis of the consultation responses and provided its own recommendations for TICCS® 2020.

Andrew Knight of RICS, the Chairman of the TICCS® Review Committee, said: “We had three main recommendations. First, the taxonomy should stay pure. There should be no hybrid categories, but companies could fall into multiple ones. It should also be as granular as possible to capture the heterogeneity of the asset class. Finally, TICCS® should be ‘normative’ and rest on first principles, but also stay open and keep evolving.”

TICCS® 2020 adds ten new types of assets including Floating Storage Units or Carbon Capture projects and introduces a distinction between financial and operating leases which allows the correct treatment of rolling stock and LNG ships.

Avi Turetsky of Landmark Partners, and Secretary of the Review Committee, explained: “TICCS® is meant to be universal. Most investors will not include all its segments in their view of infrastructure, but it is a detailed enough for all of them to be able to use it.”

TICCS® is also used to categorise the hundreds of constituents of the EDHECinfra unlisted infrastructure market indices.

Frederic Blanc-Brude, Director of EDHECinfra added: “TICCS® is about making robust comparisons between well-defined investments, portfolios and benchmarks. It is the antidote to the “core vs core+” view of the sector. A lack of transparency in the definition of risk profiles is a problem for asset managers and asset owners alike. With TICCS®, investors can build customised benchmarks that truly represent the risks of their portfolio.”

TICCS® 2020 can be accessed here.
The results of the 2019 consultation and 2020 review are visible here.
The 2020 TICCS® implementation guidelines are available here.

About the TICCS® Review Committee
The TICCS® Review Committee is composed of 15-20 members, including one Chairman and one Secretary, who represent different aspects of the infrastructure investment community. It aims to include an equal number of asset owners (pension plans, insurers, etc.) and asset managers or commercial banks as well as other standard setting bodies, regulators and academics.

The 2020 members of the TICCS® Review Committee include:
Andrew Knight (RICS) – Chairman, Avi Turetsky (Landmark Partners) – Secretary, Mark Blair (OTTP), Patrick Boylan (BlackRock), Anne-Christine Champion (Natixis), James Davis (OPTrust), Christophe Dossarp (SOURCE), Marie Lam-Frendo (Global Infrastructure Hub), Trevor Lewis (Asian Development Bank), Christoph Manser (Swiss Life), Laurence Monnier (Aviva Investors), Petya Nikolova (New York City Comptroller’s Office), Paul Shantic (CALSTRS), Marija Simpraga (LGIM), Nicholas Tan (Clifford Capital), Rick Walters (GRESB).