Q2 2023 InfraMetrics Data Release: infrastructure flat as macroeconomic environment stabilises

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Q2 2023 InfraMetrics Data Release: infrastructure flat as macroeconomic environment stabilises

4 minutes
July 27, 2023 7:05 pm

EDHECinfra unlisted infrastructure equity indicesOur analysis of infrastructure equity indices has been based on three indices in equal weights and local currency:

  1. infra300 index: a global infrastructure index, comprised of 300 assets with a total market capitalisation of USD320 billion.
  2. infra100 Core index: consists of 100 infrastructure companies in the core segment of the infrastructure market.
  3. InfraGreen index: with 106 constituents and represents infrastructure assets in the solar and wind sectors.

The infra300 Index has been relatively stable over the past quarter. Since March 2023, the index has shown a gradual monthly decline in returns, with a negative return of -0.30% in June 2023. However, on a quarterly basis, it generated a return of 0.89% over the second quarter. The renewable energy sector was the primary driver of returns. As shown in Table 1, on a year-to-date basis, the index achieved a high return of 8.15% and a respectable overall performance of 5.78% in 2022.The returns of the Infra100 Core Index have been slightly lower in comparison. It delivered a positive monthly return in January 2023 but since then has undergone fluctuating negative values, leading to a negative return of -0.59% in June 2023, and an overall negative return of -0.32% in the second quarter. On a year-to-date basis, the index made a return of 7.99%. During 2022, the total index return was driven mainly by income, which yielded a return of 7.41%. That was largely offset by the significant impact of negative valuations, however, resulting in a negative capital return of -7.35% and leading the index to a flat return of 0.06% in 2022. The infraGreen Index was quite volatile in early 2023, but has since then maintained a consistent but modest positive performance, reaching a return of 0.34% in June. The overall return for the second quarter stands at a relatively flat return of 1.47% and a strong 7.52% return year-to-date. However, like the infra100 Core Index, its performance in 2022 was weak, with a return of -2.42%. This can be primarily attributed to a very significant hit on valuations, resulting in a capital return of -11.06% over the year, which was only partially offset through dividends in the form of an income return of 8.64%. Across all the three indices, income return was quite high in 2022, a direct result of significantly large dividends paid out by infrastructure companies, particularly in the transport and renewable power sectors.Table 1: Performance of equity indices as of 30 June 2023

One Month Three Months 2023 Year-to-Date 2022
Infra300 -0.30% 0.89% 8.15% 5.78%
Infra100 Core -0.59% -0.32% 7.99% 0.06%
InfraGreen 0.34% 1.47% 7.52% -2.42%


EDHECinfra unlisted infrastructure debt indicesIn this section, we explore the performance of three debt indices in equal weights and local currency: 

  1. infra300 Debt index: this is a comprehensive global index consisting of 376 constituents that represent the newest debt instruments issued by companies belonging to infra300 equity index.
  2. infra100 Global Debt Index: this has 100 constituents with a total market capitalisation of USD42.17 billion. It represents the performance of the latest senior debt assets issued by private firms, ranked by senior borrowing value.
  3. Infra Long-Term Debt index: this has 50 constituents and includes the performance of the latest senior debt instruments ranked by their average weighted life.

Our flagship index, the Infra300 Debt Index, has experienced significant fluctuations in returns. A positive 0.80% in June came after negative returns of -0.07% in April and -0.73% in May. As a result, the overall return for the quarter was close to flat, as shown in Table 2. On a year-to-date basis, the stabilising macro-economic environment enabled the index to deliver a 2.82% return. In 2022, debt valuations were significantly hit by the significant increase in global interest rates, leading to a negative capital return of -15.93% for the infra300 Debt Index. This was only partially offset by a stable cash yield of 3.53% from the underlying infrastructure debt instruments. The infra100 Global Debt Index has performed better this year by comparison; it gave a total return of 0.44% in Q2 2023 and delivered a strong year-to-date performance of 3.48%. This is a significant improvement from 2022, when the index posted a total return of -14.20% in the wake of a sharp drop in valuations of -18.40%.Due to the longer maturity and duration of the underlying debt instruments, the infra Long-Term Debt index has shown a higher degree of volatility compared with the infra Global Debt index. In June 2023, the index recorded a return of 2.65%, almost half of the return in March 2023. However, over the second quarter, the index posted highly muted returns at 0.55%. This index was hit the worst by the rapid increase in interest rates in 2022 and lost more than a fifth of its value.Table 2: Performance of debt indices as of 30 June 2023

One Month Three Months 2023 Year-to-Date 2022
Infra300 Debt 0.80% 0.00% 2.82% -11.84%
Infra100 Global Debt 1.32% 0.44% 3.48% -14.20%
Infra Long-Term Debt 2.65% 0.55% 4.53% -21.32%

The average yield-to-maturity of global infrastructure debt remains at its highest level in more than decade. As of the end of June 2023, the average yield to maturity of global infrastructure debt had reached 6%, marking a 30bp increase in Q2 2023, despite the average credit spreads being 3bp lower. The average credit spreads stand at 173bp after dropping by approximately 30bp in 2023. Project financed loans have a credit spread of 185bp, 21bp higher than infrastructure corporate debt.