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The First State Global Listed Infrastructure Fund has returned 29.2 per cent over the five years since its inception in 2007, outperforming its benchmark index which rose by 13.5 per cent over the same period, and the MSCI World Index which returned 13.9 per cent.
The fund aims to provide investors with a mix of strong capital growth and inflation-protected income by investing in a globally diversified portfolio of infrastructure securities related to roads, airports, ports, rail, utilities, energy pipelines and storage, communication towers and satellites.
According to Peter Meany, First State Investment’s head of global listed infrastructure securities, this positive performance in a period of volatility and uncertainty highlights the defensive nature of the asset class.
Speaking at an event held at the London Transport Museum to mark the anniversary, Meany said: “Decades of under-investment on the part of governments as well as long-term trends like urban congestion, globalisation of trade, security of energy supplies, and mobility of communications have placed enormous strain on infrastructure networks. Significant investment is now required from private operators to repair and replace.”
Infrastructure prices are often regulated and can provide investors with some protection from inflation. The fund is seeing increasing demand from investors wanting to move cash back into equity markets without adding significant risk and Meany believes that consistent and growing dividends from infrastructure will become more attractive relative to cash and bonds.
For example, the fund invests in the National Grid, an operator of electricity and gas transmission networks in the UK and US, which has a dividend that has grown at more than eight per cent per annum over the last five years. Vopak, the largest independent operator of oil, chemical and LNG storage, has delivered 13 per cent compound growth in earnings per share to the fund over the same period.
Meany says: “Growth sourced from structural change will stand out during an extended period of de-leveraging for the broader economy. We also think that demand from pension and sovereign wealth funds will result in further takeovers of listed infrastructure stocks, adding cream to the cake.”
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