What Can Investors Learn from Infrastructure Indices? A EUROPEAN PENSION FUND CONTEXT November 2015 For Financial Professionals. Not for Public Distribution. PROPRIETARY. Permission to reprint or distribute any content from this presentation requires the written approval of S&P Dow Jones Indices.
We need to stop thinking about infrastructure as an economic stimulant economic stimulants produce Bridges to Nowhere. Investment in infrastructure produces a foundation for long term growth Roger McNamee 2
AGENDA 01 Where and how are pension funds looking at Infrastructure? 02 Is investment scale an impediment to accessing infrastructure returns? 03 In a cost focused investment landscape, are investment management fees commensurate with the potential returns? 3
MACRO-ENVIRONMENT: GLOBAL INFRASTRUCTURE SPENDING Infrastructure Spending Annual spending to grow from $4trn in 2012 to $9trn in 2025 Uneven spending recovery in Western Europe $1trn per annum spending gap according to World Economic Forum Pension funds looking for inflation hedging and growth are turning attention to the asset class Source : Oxford Economics, World Economic Forum 4
INFRASTRUCTURE INVESTMENT LANDSCAPE Source: CBRE Clarion Securities, Caledon Capital Management, Towers Watson 5
INFRASTRUCTURE RETURN EXPECTATIONS Source: CBRE Clarion Securities, Caledon Capital Management, Towers Watson 6
INFRASTRUCTURE INVESTMENT CONTEXT: INVESTMENT THEMES FOR EUROPEAN PENSION FUNDS Significant increase in passive investment (shift to smart indices) Increasing focus on investment costs/transparency Concerns around volatility and drawdown Search for growth to bridge funding gap (defined benefit) Achieving scale Access to diversifying asset classes Effective engagement Search for knowledge around ESG and climate change risk 7
INFRASTRUCTURE INVESTOR CONSIDERATIONS Inflation protection, income generation and risk profile comparable to low risk real estate as the most desirable characteristics 2 $215bn institutional money committed between 2004-2014 ~40% of funds investing in Infrastructure are European 2 Typically large funds- $6bn average size Global pension funds have less than 1% invested in aggregate (average 2.9% for funds actually investing including 0.4% debt allocation) 2 Specialised Infrastructure managers charge 1.5-2% plus 10-20% of excess return over benchmark return(generally 8% absolute return) 3 Lack of objective, high quality data on Infrastructure projects (OECD) Source: 1 Preqin 2 I3 Investor Survey 2013-14 3 CFA Institute: Benchmarks for Unlisted Infrastructure 8
EUROPEAN PENSION FUNDS: ACTIVE VERSUS PASSIVE EXPOSURE Expected Outperformance for Active Mandates (%) Passively Managed Assets (%) Equity Bonds Equity Bonds >2.5bn 1-2.5bn 500mn-1bn 250-500mn 100-250mn 50-100mn <50mn >2.5bn 1-2.5bn 500mn-1bn 250-500mn 100-250mn 50-100mn <50mn 0.0 0.5 1.0 1.5 2.0 2.5 3.0 0 10 20 30 40 50 60 Passive exposure for funds below USD 2.5bn in size consistent at 40-50% for equity Active mandate outperformance expectations give us an opportunity to promote appropriate benchmark choice Source :Mercer European Asset Allocation Survey 2014 9
THE TREND TOWARD PASSIVE INVESTMENT Source :S&P Dow Jones Indices 10
Investing in illiquid infrastructure is a lot like managing a multi-crop farm. Once capital has been committed it is difficult to redeploy. Returns cannot be known until after the harvest. Baccher, Orr and Settel I am very patient. As long as I get my own way in the end. Margaret Thatcher 11
LISTED INFRASTRUCTURE: THE OPPORTUNITY SET Global Listed Infrastructure Equity Universe: >400 companies, >$3trn equity market value Fixed 49% United States 24% Pipelines 7% Canada 23% Integrated Electric 3% Latin America 18% Regulated Electric 16% Continental Europe 12% Rail 4% United Kingdom 5% Gas Distribution 11% Asia 5% Toll Roads 7% Emerging Markets 4% Communications 3% Australia/NZ 3% Water 3% Airports 1% Renewable Energy Pure Play Infrastructure Companies Infrastructure Service Companies Definition Owners of long-life infrastructure assets Service companies relating to infrastructure assets Typical Cash Flow Profile - Predictable for multiple decades - High free cash flow yield - Stable long term growth Examples Toll roads Airports - Volatile - Thin profit margins and free cash flow yield - Minimal visibility beyond 2 to 3 years X Construction companies X Cement manufacturers Source: Bloomberg, CBRE Clarion Securities, Brookfield 12
KEY BENCHMARK CHOICE CONSIDERATIONS Benchmark permitting passive, opportunity costbased investment Broad market or hybrid index Stable benchmark, permitting recognition of manager value add Real return (or something which is stable) Benchmark that permits use of CIPM best practices and is efficient to implement Custom portfolio benchmark Benchmark permitting volatility based proxy for risk assessment Multiple custom asset level benchmarks 13
BENCHMARK USES IN PRACTICE Absolute return: 8% (British Columbia Investment Management) CPI +5% (CalPERS) Hybrid 50% S&P500/25%TSX/25% MSCI EAFE (Caisse du Depot) CPI + 4% + Sovereign spread (Ontario Teachers) Fixed income opportunity : Barclays Agg (MERS of Michigan) Bond and equity premium calculation (CPPIB) Diversity reflects the different role infrastructure plays in specific portfolios 14
Average Monthly Return (%) LISTED EQUITY: INFLATION HEDGING CHARACTERISTICS 1.80 1.70 1.60 1.50 1.40 1.30 1.20 1.10 1.00 0.90 0.80 0.70 0.60 0.50 0.40 0.30 0.20 0.10 0.00 1.27 1.14 Low inflation 1.12 +0.15 1.17 Dow Jones Brookfield Global Infrastructure S&P Global Infrastructure S&P Global BMI 1.08 +0.47 0.70 High inflation Source: S&P Dow Jones Indices LLC, OECD. Data from December 31, 2002 to December 31, 2014. Index performance based on total return. Charts and tables are provided for illustrative purposes. Past performance is no guarantee of future results. These charts and tables may reflect hypothetical historical performance. Please see the Performance Disclosures at the end of this document for more information regarding the inherent limitations associated with back-tested performance. Short-term inflation was measured by month-to-month changes in the United States Consumer Price Index. The median of short-term inflation was calculated from January 2003 to December 2014. Months when short-term inflation was greater than median inflation were considered to be high inflation, and vice versa. 15
RISK ADJUSTED RETURN: LIQUID ASSETS For Financial Professionals. Not for Public Distribution. PROPRIETARY. Permission to reprint or distribute any content from this presentation requires the written approval of S&P Dow Jones Indices. 16
LISTED EQUITY: DRAWDOWN CHARACTERISTICS Dow Jones Brookfield Global Infrastructure Index LESS MSCI World Index Rolling Annualised Three Year Returns For Financial Professionals. Not for Public Distribution. PROPRIETARY. Permission to reprint or distribute any content from this presentation requires the written approval of S&P Dow Jones Indices. 17
SECTOR RISK AND RETURN: WHAT S GOING ON UNDERNEATH THE HOOD? Diversified Airports Communications Electricity Oil and Gas Transmission & Transport- Storage & Distribution ation Ports Toll Roads Water Dow Jones Brookfield Global Infrastructure S&P Global BMI Annual Return (%) Past 3 Years 19.73 9.22 7.28 11.31 2.79 0.66 16.05 7.94 6.94 7.23 Past 5 Years 17.84 12.25 13.91 12.67 8.54 0.78 9.38 13.65 10.38 6.95 Past 7 Years 15.40 14.61 8.33 9.78 9.87 (0.11) 8.05 9.53 9.78 6.42 Past 10 Years 14.68 13.32 2.77 10.12 8.49 4.27 4.58 9.87 8.93 4.87 Annual Volatility (%) Past 3 Years 10.79 11.90 10.60 12.64 13.17 14.74 14.76 13.17 10.27 9.99 Past 5 Years 13.82 11.43 12.27 11.31 12.22 17.82 17.36 12.34 10.15 13.23 Past 7 Years 22.87 17.15 23.83 13.42 14.55 30.44 22.44 14.75 14.11 18.29 Past 10 Years 22.05 18.97 23.14 13.28 13.97 28.97 21.24 14.09 13.81 17.08 Return/Volatility Past 3 Years 1.83 0.77 0.69 0.89 0.21 0.04 1.09 0.60 0.68 0.72 Past 5 Years 1.29 1.07 1.13 1.12 0.70 0.04 0.54 1.11 1.02 0.52 Past 7 Years 0.67 0.85 0.35 0.73 0.68 (0.00) 0.36 0.65 0.69 0.35 Past 10 Years 0.67 0.70 0.12 0.76 0.61 0.15 0.22 0.70 0.65 0.29 Maximum Drawdown (%) Past 5 Years (15.11) (11.95) (11.57) (10.16) (26.85) (29.59) (27.45) (8.93) -14.17 (21.15) Past 10 Years (64.69) (47.22) (75.43) (36.44) (36.70) (77.34) (60.90) (44.90) -45.23 (55.44) Return/Maximum Drawdown Past 10 Years 0.23 0.28 0.04 0.28 0.23 0.06 0.08 0.22 0.20 0.09 Correlation With the S&P Global BMI Past 3 Years 0.75 0.50 0.69 0.38 0.73 0.61 0.70 0.65 0.78 1.00 Past 5 Years 0.84 0.52 0.64 0.42 0.69 0.72 0.79 0.59 0.77 1.00 Past 7 Years 0.90 0.65 0.79 0.61 0.81 0.82 0.86 0.65 0.87 1.00 Past 10 Years 0.85 0.67 0.81 0.60 0.79 0.80 0.86 0.67 0.88 1.00 Source S&P Dow Jones Indices For Financial Professionals. Not for Public Distribution. PROPRIETARY. Permission to reprint or distribute any content from this presentation requires the written approval of S&P Dow Jones Indices. 18
SPDJI S INFRASTRUCTURE INDICES SECTOR DECOMPOSITION Dow Jones Brookfield Global Infrastructure 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Water Toll Roads Ports Oil & Gas Storage & Transportation Electricity Transmission & Distribution Diversified Communications Airports Source: S&P Dow Jones Indices, Bloomberg. Data as of December 31, 2014. Net Total Return version of the indices are used. Charts are provided for illustrative purposes. Past Performance is no guarantee of future results. These charts and graphs may reflect hypothetical historical performance. Please see the Performance Disclosure at the end of this document for more information regarding the inherent limitations associated with back-tested performance. 19
AND FOR INVESTORS WITH A SMALLER RISK APPETITE Source: S&P Dow Jones Indices, Dow Jones Brookfield Global Infrastructure Broad Market Corporate Bond Index Factsheet. Data as of September 30 2015. Net Total Return version of the indices are used. Charts are provided for illustrative purposes. Past Performance is no guarantee of future results. These charts and graphs may reflect hypothetical historical performance. Please see the Performance Disclosure at the end of this document for more information regarding the inherent limitations associated with back-tested performance. 20
SUMMARY AND CONCLUSION Core return expectations for unlisted assets have been comparable to those delivered by equity and debt instruments over the longer term Listed infrastructure markets approach $4trn in market capitalisation Short term correlations with equity and debt persist but we observe listed securities display interesting return and inflation hedging characteristics Benchmarks in listed equity space vary in their construction and that leads to differences in performance and other characteristics investors should look into the benchmark selection carefully There may be merit in two tier benchmarking since no one size fits all uses solution 21
PERFORMANCE DISCLOSURE The S&P Global Infrastructure Index was launched on February 22, 2007. The Dow Jones Brookfield Global Infrastructure Index was launched on July 14, 2008. All information presented prior to the index inception date is back-tested. The back-test calculations are based on the same methodology that was in effect when the index was officially launched. Complete index methodology details are available at www.spindices.com S&P Dow Jones Indices defines various dates to assist our clients in providing transparency on their products. The First Value Date is the first day for which there is a calculated value (either live or back-tested) for a given index. The Base Date is the date at which the Index is set at a fixed value for calculation purposes. The Launch Date designates the date upon which the values of an index are first considered live; index values provided for any date or time period prior to the index s Launch Date are considered back-tested. S&P Dow Jones Indices defines the Launch Date as the date by which the values of an index are known to have been released to the public, for example via the company s public Web site or its datafeed to external parties. For Dow Jones-branded indices introduced prior to May 31, 2013, the Launch Date (which prior to May 31, 2013, was termed Date of Introduction ) is set at a date upon which no further changes were permitted to be made to the index methodology, but that may have been prior to the Index s public release date. Past performance of the Index is not an indication of future results. Prospective application of the methodology used to construct the Index may not result in performance commensurate with the back-test returns shown. The back-test period does not necessarily correspond to the entire available history of the Index. Please refer to the methodology paper for the Index, available at www.spdji.com or www.spindices.com for more details about the index, including the manner in which it is rebalanced, the timing of such rebalancing, criteria for additions and deletions, as well as all index calculations. It is not possible to invest directly in an Index. Another limitation of back-tested hypothetical information is that generally the back-tested calculation is prepared with the benefit of hindsight. Back-tested data reflect the application of the index methodology and selection of index constituents in hindsight. No hypothetical record can completely account for the impact of financial risk in actual trading. For example, there are numerous factors related to the equities (or fixed income, or commodities) markets in general which cannot be, and have not been accounted for in the preparation of the index information set forth, all of which can affect actual performance. The Index returns shown do not represent the results of actual trading of investable assets/securities. S&P Dow Jones Indices LLC maintains the Index and calculates the Index levels and performance shown or discussed, but does not manage actual assets. Index returns do not reflect payment of any sales charges or fees an investor may pay to purchase the securities underlying the Index or investment funds that are intended to track the performance of the Index. The imposition of these fees and charges would cause actual and back-tested performance of the securities/fund to be lower than the Index performance shown. As a simple example, if an index returned 10% on a US $100,000 investment for a 12-month period (or US$ 10,000) and an actual asset-based fee of 1.5% was imposed at the end of the period on the investment plus accrued interest (or US$ 1,650), the net return would be 8.35% (or US$ 8,350) for the year. Over 3 years, an annual 1.5% fee taken at year end with an assumed 10% return per year would result in a cumulative gross return of 33.10%, a total fee of US$ 5,375, and a cumulative net return of 27.2% (or US$ 27,200). 22
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THANK YOU Jon Winslade Senior Director, Channel Management jon.winslade@spdji.com Vinit Srivastava Senior Director, Product Management vinit.srivastava@spdji.com 24
APPENDIX 1: S&P DJI INFRASTRUCTURE INDEX FAMILIES S&P Global Infrastructure Family Dow Jones Brookfield Infrastructure Family Global Infrastructure Debt Global Regional Yield Global Regional Global Sectors Yield Corporate Muni Infrastructure Preferred 75 Stock Global Index based on Asia GICS Australia (Combination (ASX) of GICS). Emerging Clusters Markets include Latin Energy, America Transportatio n, and Utilities S&P High Income Infrastructure 50 highest yielding companies involved in infrastructure related activities Index of all eligible (currently 130+) global Pure-play infrastructure firms (listed on Developed market exchanges) Europe Americas North America Asia- Pacific Emerging Markets Airports Communication s Oil & Gas Storage & Transportation Toll roads Ports Water Transmission & Distribution Dow Jones Brookfield Global Infrastructure Composite Yield highest yielding components of the Global Infrastructure index Global Corporate debt outstanding for listed and unlisted firms engaged in infrastructure operations. Revenue bonds that conform to specific infrastructure sector Purpose Class and Subclass combinations. Full and Select versions are available and so are taxable and tax-exempt versions Preferred securities classified as Infrastructure Broad based selection approach tracked by 5 ETFs with assets of $2.0 billion (July 2015) Pure-play selection approach. Used as a benchmark for almost $25 billion in assets and two ETFs Launched in July 2015, first of its kind debt family of indices focused on this theme. 25
APPENDIX 2: S&P DJI INFRASTRUCTURE EQUITY INDICES KEY FACTS Dow Jones Brookfield Infrastructure Composite Developed through a partnership with Brookfield, a leader in this space, this index relies on a pure-play S&P Global Infrastructure Relying on a transparent, rules-based methodology that relies on GICS classification system of classifying Summary approach. Cash flows of companies are evaluated to companies, these indices provide a more broad-based make sure that the primary driver of revenues for those exposure to infrastructure which includes access to pureplay companies come from owning and operating infrastructure and infrastructure service companies infrastructure assets Index Universe Maintained collaboratively by S&P Dow Jones Indices Three infrastructure clusters (combination of GICS and Brookfield Asset Management industries) from the S&P Global BMI Sectors Airports Energy Oil & Gas Storage & Transportation Toll-roads Transportation Airport Services Ports Highways & Railtracks Communications Marine Ports & Services Electrical transmission and distribution Utilities Electric Utilities Oil and gas storage and transportation Gas Utilities Water Multi Utilities Diversified (multiple sectors) Water Utilities Independent Power Producers & Energy Traders Renewable Electricity Size Minimum Float-Adjusted Market Cap: US$ 500 million Minimum Total Market Capitalization: US$ 250 million Liquidity Thresholds of 3-month Average Daily Value Traded: US$ Thresholds of 3-month Average Daily Value Traded: 1 million US$ 1 million for developed markets Listing Have a developed market listing Have a developed market listing Diversification Individual stock weights are capped at 10% Country weights are capped at 50% Industry weights are capped at 50% Individual stock weights are capped at 5% 15 from emerging markets and 60 from developed The target number of stocks from the energy cluster is 15 Number of Constituents Variable, 95 as of 31 Dec 2014 75 stocks Rebalanced Quarterly in March, June, September and December Semi-annually in March and September Launch Date July 14, 2008 February 22, 2007 Source: S&P Dow Jones Indices, Bloomberg. Data as of December 31, 2014. Net Total Return version of the indices are used. Charts are provided for illustrative purposes. Past Performance is no guarantee of future results. These charts and graphs may reflect hypothetical historical performance. Please see the Performance Disclosure at the end of this document for more information regarding the inherent limitations associated with back-tested performance. 26
APPENDIX 2: S&P DJI INFRASTRUCTURE INDICES STATISTICAL SUMMARY Statistical Summary from December 31, 2004 to December 31, 2014 Dow Jones Brookfield Global Infrastructure S&P Global Infrastructure S&P Global BMI Moments Annual Return (%) 11.67 7.87 6.44 Annual Volatility (%) 13.59 16.10 16.89 Annual Skewness (0.29) (0.30) (0.26) Annual Excess Kurtosis (0.12) (0.06) (0.04) Ratios Information Ratio 0.86 0.49 0.38 Sharpe Ratio 0.76 0.41 0.30 Sortino Ratio 1.10 0.56 0.42 MAR Ratio 0.26 0.15 0.12 Omega Ratio 1.91 1.52 1.43 Percentage of Months With + Returns 67.5 64.2 60.8 Extreme Risk Statistics Best Monthly Return (%) 8.79 12.11 12.52 Worst Monthly Return (%) (14.54) (18.63) (20.53) Maximum Rolling 12-Month Return (%) 49.60 48.25 61.39 Minimum Rolling 12-Month Return (%) (40.30) (48.63) (48.77) Performance Relative to the S&P Global BMI Alpha (market relative) 0.55 0.18 -- T-stats of alpha 3.07 1.07 -- Beta to market 0.70 0.88 -- Correlation with market 0.87 0.92 -- Source: S&P Dow Jones Indices, Bloomberg. Data from December 31, 2004 to December 31, 2014. Net Total Return version of the indices are used. Charts are provided for illustrative purposes. Past Performance is no guarantee of future results. These charts and graphs may reflect hypothetical historical performance. Please see the Performance Disclosure at the end of this document for more information regarding the inherent limitations associated with back-tested performance. 27
APPENDIX 2: S&P DJI INFRASTRUCTURE INDICES DRAWDOWNS Drawdown History - the Dow Jones Brookfield Global Infrastructure Maximum Drawdown Second Largest Drawdown Third Largest Drawdown Drawdown (45.23) (7.31) (6.89) Peak Date Oct-07 Apr-13 May-11 Trough Date Feb-09 Aug-13 Sep-11 No. of Months From Peak to Trough 16 4 4 Recovery Length (No. of Months) 25 2 3 Drawdown History - the S&P Global Infrastructure Maximum Drawdown Second Largest Drawdown Third Largest Drawdown Drawdown (53.21) (4.97) (4.91) Peak Date Oct-07 Mar-04 Sep-05 Trough Date Feb-09 Apr-04 Oct-05 No. of Months From Peak to Trough 16 1 1 Recovery Length (No. of Months) 61 3 3 Source: S&P Dow Jones Indices, Bloomberg. Data from December 31, 2002 to December 31, 2014. Net Total Return version of the indices are used. Charts are provided for illustrative purposes. Past Performance is no guarantee of future results. These charts and graphs may reflect hypothetical historical performance. Please see the Performance Disclosure at the end of this document for more information regarding the inherent limitations associated with back-tested performance. 28
APPENDIX 2: S&P DJI INFRASTRUCTURE INDICES VS OTHER ASSET CLASSES Statistical Summary from December 31, 2004 to December 31, 2014 Dow Jones Brookfield Global Infrastructure S&P Global Infrastructure S&P Global BMI S&P/LSTA U.S. Leveraged Loan 100 S&P/BGCanto r 7-10 Year U.S. Treasury Bond S&P U.S. Issued Investment Grade S&P U.S. Issued High Yield Corporate Moments Annual Return (%) 11.67 7.87 6.44 4.88 5.78 5.44 7.77 Annual Volatility (%) 13.59 16.10 16.89 8.71 6.46 5.34 9.78 Annual Skewness (0.29) (0.30) (0.26) (0.30) 0.14 (0.31) (0.28) Annual Excess Kurtosis (0.12) (0.06) (0.04) 0.46 (0.11) 0.32 0.43 Ratios Information Ratio 0.86 0.49 0.38 0.56 0.90 1.02 0.79 Sharpe Ratio 0.76 0.41 0.30 0.41 0.69 0.77 0.66 Sortino Ratio 1.10 0.56 0.42 0.57 1.24 1.14 0.96 MAR Ratio 0.26 0.15 0.12 0.17 0.77 0.39 0.25 Omega Ratio 1.91 1.52 1.43 1.86 2.00 2.35 2.06 Percentage of Months With + Returns 67.5 64.2 60.8 75.0 56.7 68.3 72.5 Extreme Risk Statistics Best Monthly Return (%) 8.79 12.11 12.52 10.04 8.17 5.74 11.60 Worst Monthly Return (%) (14.54) (18.63) (20.53) (12.07) (4.14) (7.49) (14.19) Maximum Rolling 12-Month Return (%) 49.60 48.25 61.39 52.23 18.13 28.13 62.60 Minimum Rolling 12-Month Return (%) (40.30) (48.63) (48.77) (28.18) (6.14) (12.07) (29.11) Performance Relative to the S&P Global BMI Alpha (market relative) 0.55 0.18 -- -- -- -- -- T-stats of alpha 3.07 1.07 -- -- -- -- -- Beta to market 0.70 0.88 -- -- -- -- -- Correlation with market 0.87 0.92 -- -- -- -- -- Source: S&P Dow Jones Indices, Bloomberg. Data from December 31, 2004 to December 31, 2014. Net Total Return version of the indices are used. Charts are provided for illustrative purposes. Past Performance is no guarantee of future results. These charts and graphs may reflect hypothetical historical performance. Please see the Performance Disclosure at the end of this document for more information regarding the inherent limitations associated with back-tested performance. 29
APPENDIX 3: DOW JONES BROOKFIELD INFRASTRUCTURE CORPORATE BOND INDICES Indices providing exposure to debt issued by firms involved in owning and operating infrastructure assets. Such firms could either be listed in public markets or private. The following bonds are eligible for consideration: Bonds issued by firms with GICS codes defined below in the GICS Direct and/or S&P Ratings Direct databases GICS Code 55101010 Electric Utilities 55103010 Multi-Utilities GICS Sub Industry Name 10102040 Oil & Gas Storage & Transportation 55102010 Gas Utilities 55104010 Water Utilities 20305010 Airport Services 20305020 Highways & Railtracks 20305030 Marine Ports & Services Note: Specific GICS sub-industries above are chosen conservatively based on the fact that firms within these sub-industries are engaged in pure-play infrastructure operations, i.e., they exclusively own and operate infrastructure assets Bonds issued falling under the above noted GICs and which have been independently researched by SPDJI s index management team and deemed to be pure-play infrastructure companies are included 30
APPENDIX 3: DJB INFRASTRUCTURE BOND INDICES- COMPONENT CHARACTERISTICS Category Index Description Corporate Muni Preferred Dow Jones Brookfield Global Infrastructure Broad Market Corporate Bond Index Dow Jones Brookfield Global Infrastructure Corporate Bond Index S&P Municipal Bond Infrastructure Index S&P Municipal Bond Infrastructure Select Plus Index S&P Taxable Municipal Revenue Bond Infrastructure Index S&P Taxable Municipal Revenue Bond Infrastructure Select Plus Index S&P U.S. Preferred Infrastructure Stock Index Broad index covering bonds issued by firms both public and provide that mainly own and operate infrastructure assets Index covering bonds issued by firms within the Dow Jones Brookfield Global Infrastructure index (listed pure-play infrastructure firms) [U.S.] Revenue bonds in the S&P Municipal Bond Revenue Index that conform to specific infrastructure sector Purpose Class and Subclass combinations* [U.S.] Bonds within the S&P Muni Bond Infrastructure Index subject to a minimum par amount of $100 million. [U.S.] Taxable Bonds issued by a state (including the Commonwealth of Puerto Rico and US territories such as the U.S. Virgin Islands and Guam) or local government or agency that conform to specific infrastructure sector Purpose Class and Subclass combinations** [U.S.] Bonds within the Municipal Revenue Bond Infrastructure Index subject to a minimum par amount of $100 million. [U.S.] Preferred stocks that are categorized as pure-play infrastructure based on their GICS classification*** * Please refer to detailed index methodology at: http://www.spindices.com/indices/fixed-income/sp-municipal-bond-infrastructure-index ** Please refer to detailed index methodology at: http://www.spindices.com/indices/fixed-income/sp-taxable-municipal-revenue-bond-infrastructure-index *** Please refer to detailed index methodology at: http://www.spindices.com/indices/fixed-income/sp-us-preferred-infrastructure-stock-index 31
APPENDIX 3: DJB INFRASTRUCTURE BOND INDICES- SCREENING RULES Bond Type: Maturity: Coupon: Corporate Greater than or equal to one month Fix, Zero, Step up, Fix to float (only during Fix period) Size: 500 Million USD for bond to be included to the index, 400 Million USD to remain in the index Forex Rates: Ratings rule: Pricing: Bonds with Options: WM Rates Minimum of three ratings used Thomson Reuters, Bid pricing Callable and Puttable bonds are allowed in the index until the first call date. 32
ADDITIONAL RESOURCES Talking Points: Mapping out Infrastructure http://us.spindices.com/documents/education/talking-points-mapping-outinfrastructure.pdf Approaches to Benchmarking Listed Infrastructure - http://us.spindices.com/documents/research/approaches-to-benchmarking-listedinfrastructure.pdf Building on Infrastructure Debt - http://www.spindices.com/multimediacenter/building-on-infrastructure-debt Join the Conversation: Indexology Blog - http://www.indexologyblog.com/ www.spdji.com www.twitter.com/spdjindices www.linkedin.com/company/s&p-dow-jones-indices www.youtube.com/user/spindiceschannel 33