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Overview of the Fund |
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What we like about the companies in our portfolio |
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Up close & personal: Read about sector mega-trends |
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Keen to learn more about this Fund? |
The appeal of both property and infrastructure assets is that their underlying earnings are relatively defensive and are traditionally less volatile than other asset classes. Over time they are expected to deliver a happy combination of income and capital growth for investors.
The Fund targets high quality, best in class companies that provide essential products or services with limited competition, and as such typically generate predictable and recurring revenue streams throughout the investment cycle as well as generally provide a degree of protection from inflation over time. Typical investments include airports, railroads, power companies, industrial buildings and shopping malls.
Up close & personal
The Fund invests in companies on the basis of their individual merits. For some companies our investment thesis is also supported by “mega-trends” which support long-term returns from property and infrastructure assets. We describe two of these mega-trends below:
Airports
Airports are classic infrastructure assets and generally receive earnings from both aeronautical and non-aeronautical operations (such as real estate, retail and parking). While normally influenced by some form of regulation (ensuring airports receive an adequate return on their asset base), aeronautical operations are also benefitting from strong passenger growth. Global passenger volumes are projected to grow by an average of over 4% per annum doubling by 2031.1
Passenger growth historically has been closely linked to GDP growth and population growth but is increasingly being stimulated by globalisation and rising propensity to travel.
Non-aviation operations also now contribute a meaningful share of earnings for most Airports, providing diversity of earnings as well as additional growth opportunities.
1 Airports Council International, the trade representative of 1751 global airports.
North American Rail
The North American railroad sector represents irreplaceable, lightly regulated, mature infrastructure businesses. Factors that make this an attractive sector for long term, low risk investment are:
- demand for freight transport will increase;
- it is the most efficient land transport mode for large volumes and distances; and
- strained road infrastructure cannot support growth without substantial investment.
Road infrastructure has experienced a notable lack of investment since the 1950s and presents a substantial infrastructure challenge on a national level. Railroads maintain sustainable economic, environmental and societal comparative advantages versus trucking. Margin expansion is driven by pricing power railroads are able to sustain (positive real pricing) as well as by declining unit labour costs — rail's largest cost category. Union Pacific and Norfolk Southern are well positioned to take advantage of this mega-trend.
