First State Global Infrastructure Fund

Sally57

I want to include a small percentage of my portfolio (about 5%) into a infrastructure fund or IT. At the moment the First State fund mentioned above seems to fit. However, if anybody else has any suggestions for alternatives for me to research it would be appreciated before I make a final decision.

Aminatidi

Look at Gravis funds and whilst not entirely infrastructure based, also look at RM Alternative Income and Foresight Global.

tin586

It might not be directly comparable, but I have looked at Utilico Emerging Markets Trust in the past.

The level of charges (including a performance fee) put me off - among other reasons.

takesyourchances

I have held the first state fund for a few years now and have invested about 7K in it so far and I like this fund and have been adding to it recently.



I also hold 3i, HICL, TRIG (The Renewables Infrastructure Group).



I recently put a few K into the opening of JPMorgan Global Core Real Assets which includes infrastructure too along with property etc, I am looking forward to seeing how this IT works out over the long term. All my holdings are buy and hold and I re-invest the dividends.

bowlhead99

Sally57 wrote: »

I want to include a small percentage of my portfolio (about 5%) into a infrastructure fund or IT. At the moment the First State fund mentioned above seems to fit. However, if anybody else has any suggestions for alternatives for me to research it would be appreciated before I make a final decision.

I have held the FS Global Listed Infrastructure fund in the past in my or family portfolios but not at the moment - mostly exited a couple of years ago.

It is a decent fund and its asset mix (heavily into listed utilities and infra) had done very well as interest rates fell and lower bond yields caused people to look for substitutes with reasonable income and some defensive qualities; and being 90% ex-UK there was a nice boost from currency after the referendum result.

However, at the end of the day, it is a fund of listed company shares, and though it did OK in the financial crisis, a fund of large global listed company shares with 50% US exposure can get hammered just like any other fund of company shares.

What I mean by that is, if you are looking to add to your portfolio to include 'infrastructure' as if it were a new asset class separate to equities and bonds, because it might give you 'slow and stable' plodding growth and income, this fund has not really been all about boring reliable returns. As the 36% 3-yr, 97% 5-yr, 200+% 10-yr returns should tell you.

And while I accept that 95% of global infrastructure is overseas, if you were looking for a new holding that was less volatile than global equity as an asset class on its own to rebalance with the rest of your portfolio from time to time, I wouldn't make it 95% ex-UK listed companies.

Infrastructure can give a broad spectrum of returns and some resilience to market movements, because some types of infrastructure can have bond-like properties (boring dividend-paying utilities with relatively stable demand) while other subsectors such as ports and freight are cyclical businesses and highly geared to the wider booms and busts in the economic cycle (as well as to Trump tax cuts etc).

What I tend to prefer for this sector is vehicles that invest in a more 'private equity' style directly into a portfolio of infrastructure projects, monopoly operators in sectors allowing an inflation link to pricing, or infrastructure development businesses to generate a long term income yield - without the fickle public markets telling those portfolio companies that they're impressed or unimpressed with this quarter's figures and need to pull their finger out or break up the business or quickly slash costs or change the price to hit a short term revenue target.

The 'long term capital' model of private ownership of equity, some debt, and project profit-shares is something that works well for long term infrastructure investors and can be done in a closed ended fund.

To this end, I have Infrared's HICL Infrastructure (https://www.hicl.com/sites/default/files/HICL%20Introductory%20Presentation%20Summer%2019%20vWEB_0.pdf)
and Amber Infrastructure's International Public Partnerships (https://www.internationalpublicpartnerships.com/media/2139/inpp-hy2019-results-presentation.pdf).

HICL is currently 77% UK (this is lower than it used to be, as it has been increasing international exposure in recent years) while the second is 72% UK (with a variety of overseas public-private partnerships making up most of the balance).

I have a roughly 50-50 split between the two in my pension, while in my parents ISAs they hold one each.

This is not to say that First State's fund is not a good one, nor that Foresight Global's - or other rivals which also buy into international listed infrastructure companies - are bad funds. If you are simply looking to hold a new specialism within global equities (e.g. a fund that holds listed healthcare companies, one that holds listed tech companies, one that holds listed infrastructure companies, one that holds listed ... etc etc) that's fine.

However, if you are looking at adding an 'asset class', I would prefer the ones with direct exposure to investment projects and to non-stockmarket-listed companies in the sector.

Adding infrastructure is perhaps a bit like adding commercial property to a portfolio. You can invest in vehicles that directly and privately hold individual real properties ; or you can invest in something like iShares's 'global property equity securities index' product which takes exposure to hundreds of property companies which will rise and fall with market sentiment for listed companies in general and may not achieve the 'diversification' required.

Some passive investing fans will buy that sort of iShares property fund because they have heard that 'real estate' is an asset class they should 'get a piece of' but only want to use indexes; while others will say it is not even needed because property companies are already a few percent of global equity indexes which is what the market determined, so no need to buy them specifically. And someone's view on infrastructure may follow their view on property.

Unfortunately as mere 'retail investors' we do not have the ability to invest directly into institutional infrastructure funds where you are literally a partner in a partnership owning the infrastructure assets, funding them yourself as needed, so we have to use a listed retail product, so we are still exposed to market sentiment and the investment companies we use may trade at a discount or premium to underlying NAV (and underlying NAV will be subjective and not valued on a daily basis).

INPP for example were doing a fundraising this month to bring in another £75m at about 5% premium to June's NAV.

With UK infrastructure there is always the risk that Corbyn gets elected and says it's outrageous that privately owned businesses and pension funds etc should be allowed to earn money from UK infrastructure, damaging the pipeline of new opportunities for HICL and INPP; and then rips up all the existing public-private partnership agreements which were supposed to run for decades, as part of his extreme agenda.

The share prices of HICL and INPP (and former member of the sector, John Laing Infrastructure Fund) did take a hit a couple of years back, when the market got jittery about that sort of thing. However, last year a consortium of specialist private equity firms made a decent offer for JLIF and took it off the stock exchange entirely, and the takeover price gave people confidence that the prospects were not as bleak as feared.

firestone

i have held the First State fund for about 10 years in a pension and i am obviously happy but as for other funds - if i was looking passive and for something a bit different to 100% equity then
SPDR Morningstar Global Multi asset Infrastructure ETF at about a 50/50 split stocks & bonds could be worth a look
or One that has launched last year L&G Global Infrastructure index as a cheaper play on just stocks

cogito

I hold FS Global Infrastructure, Foresight UK Infrastructure Income and Foresight Global Real Infrastructure which together make up around 8% of my portfolio. I find them useful diversifiers which are uncorrelated with regular equity funds and ITs and have good defensive qualities.

msnau

bowlhead99 wrote: »

Adding infrastructure is perhaps a bit like adding commercial property to a portfolio. You can invest in vehicles that directly and privately hold individual real properties ; or you can invest in something like iShares's 'global property equity securities index' product which takes exposure to hundreds of property companies which will rise and fall with market sentiment for listed companies in general and may not achieve the 'diversification' required.

Thank you - that’s really helpful advice on what type of Infrastructure fund to use to truly diversify rather than pseudo-diversfy. If possible, can you please recommend Property equivalents that achieve true diversification? Admittedly, I was looking at the IShares Global Property Index. But I now realise this is not really diversification.