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A specialist global equity fund dedicated to investing in companies with high quality infrastructure assets, with a view to delivering a sustainable level of income and capital growth. The performance objective is to deliver a return above inflation on a 5-year view, with income being an important component of the total return.
The fund’s KIID Synthetic Risk and Reward Indicator (SRRI) is 6. This is a regulatory measurement that is, where possible, calculated from the volatility of its weekly performance over a five-year period. A score of 6 means the fund’s historic volatility is between 15% and 25%.
Our analysis indicates that the fund’s five-year standard deviation is towards the lower end of the 15%-25% range associated with a score of 6. An SRRI score of 6is not out of step with that of global equities. Different share classes could have different SRRI scores.
The ClearBridge Global Infrastructure Income team is based in Sydney. The fund is managed by four portfolio managers, Daniel Chu, Charles Hamieh, Shane Hurst and Nick Langley, who also comprise the Investment Committee. They are supported by a dedicated team of research analysts. Clearbridge is a specialist investment manager of Franklin Resources, Inc.
The fund aims to provide investors with a reliable income and a total return that outpaces OECD G7 inflation over a rolling five-year period. In practice, the team are aiming to deliver an outcome consistent with OECD G7 inflation (CPI) + 5.5% (gross of fees). The team seeks to deliver this absolute real return by investing in a range of listed infrastructure securities across a range of sub-sectors, achieving diversification through geography as well as by exposure to different cash flow drivers (regulated/user pays) and macro, regulatory and political regimes.
The fund typically holds 30-60 listed infrastructure securities, and it is constructed without reference to any benchmark. Rather, the team is focused upon delivering inflation-linked capital growth over an economic cycle, together with a reliable income stream. Although regulated utilities are the mainstay of the portfolio (50-90%), the fund can hold 0-40% in renewables, 0-40% in transport, 0-20% in energy infrastructure, 0-20% in communications, and 0-10% in community/social. Up to 20% can be invested in developing markets. The fund may hold up to 10% in cash when the team is unable to identify sufficiently attractive investment ideas.
The team begins with the premise that for a company to be termed infrastructure, the underlying investment must be a real asset, available for public use, and be underpinned by a regulatory framework. Within these parameters, the focus is on companies with regulated assets, such as water and wastewater, gas and electricity transmission, as well as companies with ‘user pays’ assets (for example, toll roads, railways and ports).
The team works from a proprietary list of companies (the ‘RARE Income Universe’) drawn from the global universe of infrastructure-related securities. The list features businesses that have been screened for liquidity, the visibility and predictability of their cash flows and the quality of their dividend yields. Each company is assigned an infrastructure score, based upon the proportion of its assets that are deemed to be infrastructure of any kind, combined with an assessment of infrastructure quality, which reflects factors such as the predictability of future cashflows. Companies must also have a minimum one-year forward dividend yield of 2.5%. A scoring process generates a list of around 170 companies, on which the team carries out detailed analysis. Their specialist understanding of regulatory and concession frameworks is a key part of this work, as is a comprehensive schedule of meetings with customers, suppliers, regulators and industry experts. This work is written up into a concise format that also includes valuation analysis, where the key metric is the excess return forecast (defined as the real expected return minus the real required return). At the weekly Investment Committee, detailed scenarios around the excess return forecasts are considered and this supports their portfolio construction decisions.
Formal documentation, including the fund prospectus and the KIID, should be sought directly from the asset manager. For ease of reference, a link to the ASSET MANAGER WEBSITE can be found above, as well as a link to the ASSET MANAGER FACTSHEET.
At The Adviser Centre, our primary aim is to support financial professionals in their fund selection and suitability work through independently-minded research, borne of decades of industry experience. Our process is framed by the fundamental concepts of “quality”, “value” and “utility”, through which we answer the key questions of why to invest in a fund, how it is likely to behave and how it can be deployed.
The Adviser Centre team members are some of the most experienced in the fund research industry. We can always look forward to robust and constructive discussions and we have great respect for their views and perspectives, which, given the breadth of their fund and market knowledge, come from an extremely well-informed position.
We have known and worked with the team for several years and we value their experience and the insights they provide to our own investment process. The service differentiates itself by its more focused nature and the information on their factsheets is useful in emphasising a fund’s key mandate, exposure and style biases, helping to explain the risk/return journey that our customers can expect.
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