At a time when we all are looking for ways to beat inflation, social infrastructure funds can come into their own. Social infrastructure involves investment in solid assets such as schools, hospitals and prisons, and most contracts are backed by governments. Cash flows from these investments are high and consistent. And while the costs of the bigger projects are usually fixed, the revenues are inflation-linked, usually to the retail price index. This means that many funds of this type offer a way to cope with soaring inflation. But which one should you buy?
3i Infrastructure (LSE: 3IN), managed by Cressida Hogg, has just announced its annual results. It delivered impressive income generation. Meanwhile, retail price inflation of 5.3% over the year has added £7m to the fund’s net asset value (NAV). “The fund’s potential for significant capital protection and its yield of close to 5% is exceptionally attractive in an environment of low rates,” says Investors Chronicle.
The fund’s main aim is to invest in long-term infrastructure projects around the world in order to generate a healthy yield – something it is managing nicely at the moment with a yield of 4.8%. And thanks to its exposure to India, via a large stake in the 3i India Infrastructure fund, it also has “the potential for capital appreciation over time”, says Garry White in The Sunday Telegraph.
The fund currently trades at a small premium to net asset value (NAV) of 1.7%. However, this is much lower than other funds in the sector, which average premiums of more like 5% to 9%.
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3i Infrastructure Fund top ten holdings
| Name of holding | % of assets |
|---|---|
| Anglian Water | 23.8% |
| Eversholt Rail | 19.6% |
| Oystercatcher | 14.5% |
| Adani Power | 6.4% |
| Elgin | 4.9% |
| TDF | 4.5% |
| I2 Loan Notes | 3.9% |
| NGW Arqiva | 3.9% |
| Krishnapatnam Port | 3.8% |
| Octagon | 3.8% |