“This stuff is foundational,” says Neil Jones, division director at Macquarie Group, specialists in infrastructure investment.
“Even though things are fairly tough economically speaking, people are not going to stop using them.”
Peter Meany, manager of the First State Global Listed Infrastructure fund, notes the sector is growing quickly, with a current global universe of some 100 key stocks that are considered pure infrastructure, representing a global market of some $1.2trn.
“A number of markets, such as Australia, Netherlands and Canada have jumped on infrastructure in the last 10 years. The focus so far has been in direct infrastructure, where you don’t have so much market volatility.”
Both Macquarie and First State launched global infrastructure funds to the UK market in 2007; the Macquarie Global Infrastructure Securities and First State Global Listed Infrastructure funds respectively.
“Any investor can now choose to have infrastructure in their portfolio,” says Jones.
“You’ve got daily stock market liquidity. You tend to see mid-range correlation with global and UK equities. There’s a very valid diversification argument.”
| First State Global Listed Infrastructure Largest holdings % 30-Jun-2008 |
|
| ABERTIS INFRAESTRUCTURAS | 5.30 |
| AMERICAN TOWER CORP | 5.00 |
| SUEZ | 4.90 |
| KONINKLIJKE VOPAK | 4.50 |
| E.ON AG | 4.10 |
| SES GLOBAL | 4.00 |
| MACQUARIE INFRASTRUCTURE GROUP | 3.80 |
| VINCI | 3.40 |
| PUBLIC SERVICE ENTERPRISE GROUP INC | 3.30 |
| TRANSCANADA CORP | 3.20 |
Agriculture
Another theme which is attracting interest is agriculture. After more than two decades in which the agriculture sector has been flat, a global shift is taking place and demand has finally overtaken supply.
“There has been a huge surge in prices in energy and commodities,” notes Henry Boucher, manager of Sarasin’s agriculture fund, AgriSar.
“Energy has a lot of themes associated with it, and food is one of the most interesting.”
Multi-themed
A different approach to globally themed investing is adopted by Mike Jennings on the Premier Global DSR fund. The fund, which launched in May 2008, is a global equity vehicle which invests across a range of themes.
“There are two ends of the spectrum. Single themed funds such as water, infrastructure and energy give you a narrow spectrum with higher risk and higher potential returns. I focus on longer-term attributes. My goal is to provide a number of themes – in theory themes which span regions and do not have industrial bias.”
Global themed funds, rather than funds which focus on a single theme, could represent the future for this area of investment. The beauty of having 10 themes rather than one, says Jennings, is that it is relatively easy to replace one of them.
“The problem with themes is that there can be periods where they do not perform. That tends to happen in any long-term secular move – you’re bound to have cycles.”
At present infrastructure funds generally reside in the IMA Specialist sector, which acts effectively as a catch-all for funds which do not fit into any other sectors. As a rule of thumb the IMA will look at the possibility of creating a new sector when there are at least 10 funds following the same trend. These sectors, should they be created, could be in line for major inflows in the future.