In these inflationary times, the world of infrastructure offers some enticing opportunities for investors. Companies that operate in this space – which can cover any major capital project, whether building a road, hospital or prison – tend to benefit from predictable earnings and strong pricing power. This means that investors usually get a high, reliable yield.
One of the best ways in is the First State Global Listed Infrastructure Fund, run by Peter Meany. This is one of only three open-ended (unit-trust style) funds focused on infrastructure investments. Its long-term performance has beaten both of its competitors. It also consistently outperforms its benchmark, the UBS Global Infrastructure & Utilities 50-50 Index, with a 28.3% return over the last three years and a yield of about 3%.
One of the key elements of the fund’s success is its global focus, says Investors Chronicle. The fund invests in some of the big infrastructure stories around the world. In America, President Obama has an extensive infrastructure investment plan, and roads and highways are fundamental to growth in emerging markets such as China. The main themes within Meany’s portfolio are toll roads, integrated utilities and regulated utilities, all of which are “highly diversified on a geographical basis”.
The fund should also benefit from its exposure to areas such as electricity transmission, via National Grid, and oil storage, through Vopak. Both these firms “are able to increase prices in line with inflation”, say Mark Dampier of Hargreaves Lansdown.
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First State Global Infrastructure’s top ten holdings
| Name of holding | % of assets |
|---|---|
| Vinci | 6.5% |
| Vopak | 4.4% |
| Atlantia SPA | 4.2% |
| PPL Corp | 3.9% |
| GDF Suez | 3.7% |
| National Grid | 3.6% |
| Central Japan Railway | 3.5% |
| E.On AG | 3.5% |
| Abertis Infraestructureas | 3.1% |
| SES Global | 3% |