Why invest in global listed infrastructure?
Infrastructure holds an important place in the fabric of modern society, serving as the backbone of the world economy. In its broadest sense, infrastructure refers to assets associated with the provision of essential services for the functioning of global society such as utilities and transportation networks. These types of businesses typically provide stable and growing cash flows, often backed by inflation-linked revenues and the predictability derived from long-term contracts.
The favourable characteristics of infrastructure can be accessed in different ways, but the attractions of investing in listed infrastructure companies include liquidity, access for retail investors to invest in the asset class, and higher yield and lower volatility relative to global equities.
What are the benefits for an investor’s portfolio?
The predictable cashflows generated by infrastructure assets provide clear diversification benefits for investors’ portfolios. History shows that investing in listed infrastructure enhances the returns generated by an investor’s equity exposure, while reducing the overall level of risk. The importance of taking a long-term approach cannot be emphasised enough because the longer the holding period, the more pronounced the potential benefit. Past performance is not a guide to future performance.
Why M&G Global Listed Infrastructure Fund?
The M&G Global Listed Infrastructure Fund is a high conviction fund holding 40-50 companies that exhibit strong and growing cashflow dynamics. As a result of these characteristics, we expect dividends from these companies to increase sustainably over the long term. Through the consistent application of this approach, the fund aims to meet two objectives:
- Deliver a higher total return (the combination of income and growth of capital) than the MSCI AC World Index over any five-year period
- Increase the distribution paid to investors every year in sterling terms
The fund is managed with a long-term investment horizon, consistent with the long-life nature of infrastructure assets, and follows a disciplined investment process which incorporates ESG, to deliver on its performance objectives.
By investing beyond the traditional realm of economic infrastructure (utilities, energy and transport) and diversifying into social (health, education and security) and evolving infrastructure (communication, transactional and royalty), we aim to provide a balanced portfolio which showcases the best attributes that listed infrastructure has to offer and better reflects an increasingly digital society.
The fund holds a small number of investments, and therefore a fall in the value of a single investment may have a greater impact than if it held a larger number of investments. The value from the fund’s assets will go down as well as up. This will cause the value of your investment to fall as well as rise and you may get back less than you originally invested.
The fund invests mainly in company shares and is therefore likely to experience larger price fluctuations than funds that invest in bonds and/or cash.
About Alex Araujo
Alex Araujo has been the manager of the M&G Global Listed Infrastructure Fund since it launched in October 2017, and was appointed manager of the M&G Global Themes Fund in January 2019. Alex initially joined M&G’s income team in July 2015 and became co-deputy manager of the M&G Global Dividend Fund in April 2016. Alex has 25 years of experience in financial markets. He graduated from the University of Toronto with an MA in economics and is a CFA charterholder.