Fund Manager Interview - M&G (Lux) Global Listed Infrastructure Fund

5 min read 15 Feb 22

1. Why should listed infrastructure be considered as an investment opportunity?

We believe global listed infrastructure provides a compelling proposition for long-term investors looking to diversify. The asset class has typically benefited from characteristics of higher dividend yield and lower volatility compared to global equities and its investment universe offers a wide array of attractive opportunities to invest in dividend growers.

2. How do funds linked to listed infrastructure work?

Funds like the M&G (Lux) Global Listed Infrastructure invest in shares of publicly listed infrastructure companies that own or control physical assets, which provide a strategic barrier to entry. They also tend to exhibit characteristics of lower volatility and higher dividend yield compared to global equities. To provide exposure to the full breadth of the asset class and the quality it has to offer in its entirety, we pick stocks from three different infrastructure categories: ‘Economic’, ‘Social’ and ‘Evolving’ infrastructures. The ‘economic’ category encompasses the traditional cornerstones of infrastructure investing: utilities, energy pipelines and transport (65-75% of the overall portfolio). ‘Social’ infrastructure comprises health, education and civic infrastructure (10-20% of the overall portfolio). The ‘evolving’ sphere is made up of communication infrastructure, transaction networks and royalty companies (15-25% of the overall portfolio).

The value and income from the fund's assets will go down as well as up. This will cause the value of your investment to fall as well as rise and you may get back less than you originally invested. Past performance is not a guide to future performance. The fund can be exposed to different currencies. Movements in currency exchange rates may adversely affect the value of your investment.

3. Can listed infrastructure deliver reliable and sustainable long-term growth?

Long-term contracted revenue, often inflation-linked, provides a solid foundation for the reliable cashflows generated by infrastructure assets. Inflation-linked revenue is a key feature of the asset class and a key driver of the growing cashflows and dividends we seek, but inflation is not the only source of growth. Listed infrastructure is a beneficiary of long-term structural trends, such as renewable energy, digital connectivity and demographics – powerful themes which we believe will endure for many decades to come.

4. How does the current upward trend in inflation affect these investments?

Inflation has been cited as a concern for listed infrastructure as the asset class has historically shown a degree of sensitivity to short-term movements in bond markets, but we expect the long-term effects for our growth-focused strategy to be different. We welcome economic growth with controlled inflation. Inflation-linked revenue is a key feature of the asset class and a key driver of the growing cashflows and dividends we seek.

5. Is ESG important for investments in listed infrastructure?

ESG considerations are increasingly pertinent to many facets of investing, yet the infrastructure sector merits a specific level of scrutiny. We take this very seriously and all securities we invest in are subject to ESG and Sustainability Criteria checks and analysis, achieved through M&G’s proprietary analysis. In order to ensure that the assets in which we are investing are sustainable over the long term, our exclusions policy applies strict limits to companies exposed to coal-fired or nuclear power generation.

ESG information from third-party data providers may be incomplete, inaccurate or unavailable. There is a risk that the investment manager may incorrectly assess a security or issuer, resulting in the incorrect inclusion or exclusion of a security in the portfolio of the fund.

6. What opportunities does the global infrastructure deficit and the resulting international spending plans offer? What investments should be considered?

Higher infrastructure spending around the world may provide a favourable backdrop for listed infrastructure as an asset class, but although we acknowledge the tailwind of fiscal spending, listed infrastructure is a beneficiary of powerful trends which are likely to be more enduring. 

Infrastructure sits at the heart of the transition to a net-zero carbon world. Commitments to invest in a green economy should provide a powerful tailwind for companies owning and operating physical infrastructure assets. We are at the early stages of a multi-decade opportunity for these businesses to build and improve infrastructure assets in US and Europe. 

We also see excellent prospects for digital infrastructure. Governments acknowledge the critical nature of infrastructure in the digital economy, with universal broadband access having been an integral part of fiscal stimulus packages globally, data centres being beneficiaries of a powerful structural growth trend and communication towers’ companies capitalising on long-term opportunities created by rising internet penetration and mobile data usage. Other dominant themes include transportation of the future, urbanisation, water and waste management and social and demographic shifts. 

These thematic tailwinds are likely to persist for many decades to come, creating exciting opportunities for investors.

Please refer to the glossary list for an explanation of the investment terms used in this article. Please note that these links open a new window.

Please note, investing in this fund means acquiring units or shares in a fund, and not in a given underlying asset such as building or shares of a company, as these are only the underlying assets owned by the fund.

The fund holds a small number of investments, and therefore a fall in the value of a single investment may have a greater impact than if it held a larger number of investments.

Further details of the risks that apply to the fund can be found in the fund´s Prospectus.

The views expressed in this document should not be taken as a recommendation, advice or forecast. 

The fund invests mainly in company shares and is therefore likely to experience larger price fluctuations than funds that invest in bonds and/or cash.

More information about the fund

For Investment Professionals only. Not for onward distribution. No other persons should rely on any information contained within. Distribution of this document in or from Switzerland is not permissible with the exception of the distribution to Qualified Investors according to the Swiss Collective Investment Schemes Act ("Qualified Investors"). Supplied for the use by the initial recipient (provided it is a Qualified Investor) only. The collective investment schemes referred to in this document (the "Schemes") are open-ended investment companies with variable capital, incorporated in Luxembourg. This information is not an offer or solicitation of an offer for the purchase of investment shares in one of the funds referred to herein. Purchases of a fund should be based on the current Prospectus. The Instrument of Incorporation, Prospectus, Key Investor Information Document, annual or interim Investment Report and Financial Statements, are available free of charge in English or German unless specified below, in paper form, from one of the following – M&G International Investments S.A., German branch, mainBuilding, Taunusanlage 19, 60325 Frankfurt am Main, the Austrian paying agent Société Générale Vienna Branch, Zweigniederlassung Wien, Prinz Eugen-Strasse, 8-10/5/Top 11 A-1040 Wien, Austria; the Luxembourg paying agent Société Générale Bank & Trust SA, Centre operational 28-32, place de la Gare L 1616 Luxembourg. For Switzerland, please refer to M&G International Investments Switzerland AG, Talstrasse 66, 8001 Zurich or Société Générale, Paris, Zurich Branch, Talacker 50, P.O. Box 5070, 8021 Zurich, which acts as the Swiss representative of the Schemes (the "Swiss Representative") and acts as their Swiss paying agent. For Germany and Austria, copies of the Instrument of incorporation, annual or interim Investment Report, Financial Statements and Prospectus are available in English and the Prospectus and Key Investor Information Document/s are available in German. Before subscribing investors should read the Prospectus and Key Investor Information Document, which includes a description of the investment risks relating to these funds. M&G International Investments S.A. may terminate arrangements for marketing under the new Cross-Border Distribution Directive denotification process. Complaints handling information is available in English or German from the following websites: Germany: www.mandg.com/investments/professional-investor/de-de/complaints-dealing-process; Austria: www.mandg.com/investments/professional-investor/de-at/complaints-dealing-process; Luxembourg: www.mandg.com/investments/professional-investor/en-lu/complaints-dealing-process. This financial promotion is issued by M&G International Investments S.A. Registered Office: 16, boulevard Royal, L 2449, Luxembourg.

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