Infrastructure Q&A

You can purchase the First State Global Listed Infrastructure from the platforms listed on our how to invest page.

The following share classes are available for the First State Global Listed Infrastructure Fund:

First State Global Listed Infrastructure Fund Class A (Acc) GBP

First State Global Listed Infrastructure Fund Class A (Inc) EUR

First State Global Listed Infrastructure Fund Class A (Inc) GBP

First State Global Listed Infrastructure Fund Class B (Acc) GBP

First State Global Listed Infrastructure Fund Class B (Acc) USD

First State Global Listed Infrastructure Fund Class B (Inc) GBP

First State Global Listed Infrastructure Fund Class B Hedged (Acc) EUR

First State Global Listed Infrastructure Fund Class B Hedged (Acc) GBP

First State Global Listed Infrastructure Fund Class B Hedged (Inc) GBP

To find out more information, please contact one of Sales Team members. You can find their contact details here.

Not necessarily. The asset class has performed well, in part aided by low interest rates, but that does not in itself make the sector expensive relative to other investment opportunities. Global infrastructure is delivering strong earnings growth which, when combined with lower discount rates (from falling interest rates), means that intrinsic asset values have also increased meaningfully. Despite delivering a double digit returns for the last decade, dividend yields for global listed infrastructure have remained in the 3%-4% range and are underpinned by reasonable payout ratios (~70%) and robust company Balance Sheets. In fact, in the last quarter alone, pension funds and unlisted infrastructure funds have aggressively bid for listed infrastructure firms and assets (Buckeye Partners, El Paso Electric, Genesee & Wyoming, Ausol) at prices well above where the listed sector is trading.

Please remember that past performance is not a guide to future performance.

No. Infrastructure assets offer defensive, non-cyclical growth opportunities from a variety of areas. These include:

• investment-driven earnings from the build-out of new transmission and distribution assets by electric, gas and water utilities
• clean renewable energy replacing carbon emitting, coal-fired electricity generation
• increasing equipment on mobile phone towers, to cope with growing data usage on smartphones
• rising traffic volumes on toll roads, as a result of urban congestion
• structural growth in global travel driving more passengers through airports and
• new energy pipelines and storage infrastructure being built to facilitate the world’s changing patterns of energy supply and demand.

To be clear, global listed infrastructure is an interest rate sensitive asset class (and I don’t profess to know the future direction of rates) but it also has defensive growth attributes.

Use of Global Listed Infrastructure within investor portfolios has varied over time. Initially we saw it used as a defensive, low volatility equity. This expanded to see it used as a source of income, as declining bond yields increased the relative appeal of its growing divided streams.

More recently, we have seen listed infrastructure form part of the real assets segment of investors’ portfolios, due to the nature of its long-life, hard assets and ability to offer insulation from the effects of inflation as well as offer structural earnings growth.

We have also seen investors utilise Global Listed Infrastructure as a diversified, liquid and lower fee alternative to unlisted infrastructure allocations.

You will gain a little bit of exposure - but not very much. We estimate that most global equity managers may hold between 2% and 4% (or less) of their portfolio in infrastructure assets, and this exposure could be concentrated amongst a small number of large, well-known utility names. However, much of the alpha generated in our diversified portfolio has come from mid-cap stocks, which are under-researched by global equity managers, such as toll roads, oil storage, mobile towers and water utilities. Hence, if you decide global listed infrastructure suits your investment needs, then you need to make an explicit allocation in your investment portfolio in order to gain a meaningful exposure to the asset class.

The vast majority of infrastructure stocks are traditional companies, and we believe they are sensibly leveraged (30-50%) and run for their shareholders. In recent years, these stocks have strengthened balance sheets by reducing costs and repaying debt. We have also seen widespread refinancing of existing debt, to lock in reduced rates and diversify funding sources. The wave of share buybacks and bolt-on acquisitions suggest that many management teams now feel they are under leveraged.

In short, yes! While investors have embraced infrastructure as an asset class since the 1990s, the idea of investing in infrastructure via listed securities was developed by a few Australian asset managers between 2005-2007.

Global Listed Infrastructure (GLIS) is now widely acknowledged as a standalone asset class by asset consultants, investors and the funds management industry. Today we estimate funds under management in GLIS to stand at around US$100 billion.

It’s also worth remembering that infrastructure assets also have their own set of associated risks and return profile and structural drivers distinct from those of stocks. Notably infrastructure stocks tend to provide essential goods and services to society, which can be highly regulated and prices locked in. This means that listed infrastructure has a set of characteristics which tend to be less affected by economic growth, or lack thereof.