Downing addresses appetite for income with new infrastructure fund

by | Mar 3, 2022

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Downing Fund Managers has launched the new VT Downing Listed Infrastructure Income Fund, offering investors low-cost access to an increasingly popular asset class. The fund aims to provide an attractive source of inflation adjusted income over the long term through a diversified, low-cost, open-ended structure not previously available to investors.

Structured as an OEIC, the fund focuses on infrastructure and renewable energy investment trusts listed on the London Stock Exchange and invests in a diversified portfolio of trusts in one or more of five areas – including utilities, renewable energy, social infrastructure, transport and digital infrastructure. A set of defined rules seeks to allocate capital to sectors and trusts with the greatest return potential.

Downing believes that the infrastructure landscape has progressed significantly since the original Private Finance Initiative (PFI) and Public-Private Partnership (PPP) schemes were introduced. As the government’s ambitions and economic demands have shifted over time, so has the opportunity to invest in these structural shifts. For example, the explosion in data has opened up greater opportunities to invest in digital infrastructure assets; and increased reliance on renewable energy generation has brought the need for substantial battery storage capacity to the forefront.

Judith MacKenzie, Head of Downing Fund Managers, comments:

“The infrastructure sector is growing at a rapid rate, and this presents clear opportunities for private capital to support its development. This fund opens up the asset class to a much wider investor base. Traditionally, infrastructure has been offered in private, unlisted funds where capital is tied up anywhere from 5-10+ years and was only accessible to large institutional investors. By offering an open-ended structure that invests in a portfolio of both established and newer, more niche investment trusts at a low cost, the fund offers an attractive source of inflation-adjusted income over the long term, with asset backing supporting capital values through economic cycles.”

The portfolio is currently invested in 39 investment trusts which are typically in operational infrastructure and renewable energy assets that provide essential services to economies and societies. Holdings include Primary Health Properties PLC (PHP)[1], a £2.6bn portfolio of 513 modern properties for local primary healthcare premises; HICL Infrastructure PLC[2] (HICL) which invests in core infrastructure that is critical to the functioning of society – its 116 asset portfolio includes schools, fire stations, law & order, and transport assets; and the Renewable Infrastructure Group PLC (TRIG), a c.£2.7bn market cap[3] portfolio of offshore and onshore windfarms, solar parks and battery storage projects.

Josh McCathie (pictured), Fund Manager comments:

“Investment in this space can directly boost the country’s economy and create a platform to generate long-term, sustainable returns for investors as well as benefits for society. This fund offers investors the opportunity to earn attractive returns, provides diversification from traditional assets, along with a consistent income stream which is often protected from inflation.”

The minimum investment is £1,000 and the fund has no initial or exit charges, with costs capped at an Ongoing Charges Figure (OCF) of 0.40%. It seeks to provide a competitive yield, with distributions made quarterly.

[1] Primary Health Properties PLC, Annual Report 2020

[2] HICL Infrastructure, Factsheet Summer 2021 (31 March 2021)

[3] TRIG-H1-2021 Interim Results Presentation, 30 June 2021

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