First State Global Listed Infrastructure - power to the people
Jonathon Curtis | Mon 04 March 2019
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- The managers invest in companies whose services are always in demand
- Long-term performance has been good but has stalled recently
- The impact companies have on the world is important to the managers
Our view
Consumers can be fickle, with constantly changing tastes and trends. But no matter what preferences we have, there are things we’ll always need. Energy to power our daily lives. Satellites and towers for the never-ending flow of communication. Roads, railways and ports to get people and goods from place to place. As the global population grows, demand for these things is expected to increase rapidly.
Peter Meany and Andrew Greenup aim to take advantage of the rise in infrastructure development around the world.
In the First State Global Listed Infrastructure Fund they invest in companies they think can grow steadily and are difficult to compete with. They invest fairly conservatively and make sure they get a thorough understanding of a company before considering it for the fund. They invest in a fairly small number of companies and are able to invest in emerging markets, both of which add risk.
We think the managers are supported by a strong team and like their sensible approach to investing. They’ve done a good job for investors over the long term and we expect that to continue, though nothing’s guaranteed. This is our preferred option for investing in the infrastructure sector. It's not on the Wealth 50 though because it's fairly specialist and there are other global funds that invest more broadly and are available at lower prices.
How’s the fund performed?
The fund's grown 157.6%* since it launched in 2007, while the benchmark’s grown 140.2%. The fund usually performs broadly in line with the benchmark when the market rises. When it falls, the fund’s normally held up better. There’s no guarantee it’ll keep performing like this though.
Recent performance has been a bit weaker. US electricity company PG&E, and toll-road operators Atlantia and CCR all saw big drops in their share prices. The managers think the market’s overreacted to bad news though and have stayed invested in the companies.
Performance was also held back by US utility companies. Last year President Trump cut corporate taxes, which was expected to boost the profits of US companies. But utilities companies had to pass on the benefits to their customers in the form of lower prices.
Rising interest rates haven’t helped either. Many infrastructure companies borrow money to build and maintain their projects. Higher interest rates increases the cost of paying back that debt.
First State Global Listed Insfrastructure performance since launch
Past performance is not a guide to the future. Source: Lipper IM* to 31/01/2019
| Annual percentage growth | |||||
|---|---|---|---|---|---|
| Jan 14 -
Jan 15 |
Jan 15 -
Jan 16 |
Jan 16 -
Jan 17 |
Jan 17 -
Jan 18 |
Jan 18 -
Jan 19 |
|
| First State Global Listed Infrastructure | 26.0% | -3.7% | 34.4% | 3.7% | 7.9% |
| FTSE Global Core Infrastructure 50/50 | 29.4% | -3.9% | 28.8% | 3.8% | 12.7% |
Past performance is not a guide to the future. Source: Lipper IM to 31/01/2019
Managers’ outlook:
Many infrastructure projects cost vast sums of money, so governments often fund them. Meany and Greenup don’t pay much attention to the impact of government spending on these companies though, as it can quickly change. They prefer to focus on what they think a company’s prospects are based on other factors, such as how well-managed they are.
They’ve recently increased investment in the US, as they think there are lots of excellent companies based there. These include natural gas distributor Williams Companies, and communication towers business SBA.
They’re also positive about infrastructure that promotes renewable energy. They think companies with good environmental records are better than those that have a negative impact on the environment. The same goes for the impact they have on communities and society as a whole, and how management runs the business.
They think the more responsible and well-run a business is, the better it’ll do in the future. By investing in ‘good’ companies, in terms of their financial strength and how they behave, the managers think it’ll benefit the fund over the long run.