M&G Global Listed Infrastructure: Rapid? We place more emphasis on solid fundamentals, says fund manager Alex Araujo, who aims to deliver reliable long-term returns
Alex Araujo would be the first to admit that the fund he manages isn’t all that hot. The M&G Global Listed Infrastructure Fund is a collection of processing plants, LNG terminals, toll roads and laboratories.
Araujo looks for these and other solid assets that will pay out a reliable income — and then holds them for years.
Racy has fallen out of favor in recent months. The most exciting investments see the biggest falls as investors get nervous about companies that promise fabulous returns but have yet to prove themselves. A good example is US tech stocks, which are down around 26 percent year-to-date.
Today it’s steady and slow, which is something investors are particularly excited about. Araujo believes infrastructure funds can really prove their worth in this new turbulent environment of rising interest rates and volatility.
M&G Global Listed Infrastructure is a concentrated portfolio of 40 to 50 companies that Araujo and his team believe have the potential to provide sustainable earnings growth over the long term.
They very rarely change the composition of the portfolio: most of the fund’s holdings have existed since its inception in 2017. Today, the £572m fund has holdings around the world – 36% in US companies, 16% in Canadian, 10% in Canada percent in the UK and 9 percent in Italian companies.
The fund has turned a £1,000 investment into £1,252 in three years and is up 8.1 per cent over the past year. Additionally, it has a dividend yield of over 2 percent. Araujo believes part of the fund’s success is that it invests in companies that are resilient to high inflation.
“These companies are usually able to pass inflation on to their customers,” he says. “Some are companies that benefit directly from inflation. For example, we invest in energy infrastructure, the value of which has increased as energy prices have risen.’
The fund’s top positions include Canadian pipeline and oil storage company and refiner Gibson Energy and German utility Eon.
Araujo expects dividends from this type of energy company to continue to rise. “They have reliable sources of income from critical assets that we depend on daily,” he says.
Additionally, in response to the economic impact of Covid 19, governments around the world have committed to infrastructure projects that will keep the sector growing even in a recession. In the US, President Biden has committed more than $2 trillion (£1.7 trillion) to infrastructure programs, while in Europe Next Generation EU has ambitions to boost renewable energy and clean transport.
Although Araujo rarely touches the portfolio, he’s always on the lookout for a bargain. The March 2020 market dips at the start of the pandemic were a particularly busy time as he and the team bought six new companies. One of these was A2A, a northern Italian multi-utility company.
Araujo says: “If you think back to the newsreels in Italy at the time, the military was in the streets, people were wearing hazmat suits, hospitals were filling up – there was real panic. but [the investment] worked out well for us.’
Shares fell to €1.02 in late March before peaking at €1.93 in October 2021. They are trading today at EUR 1.22. Shares of the M&G Global Listed Infrastructure fund trade at around £1.60 and annual charges are 0.7 per cent. The exchange identifier is BF00R92.
M&G Global Listed Infrastructure: A fund built on solid foundations
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