Get consistent returns with First State Global Listed Infrastructure

This fund provides diverse exposure to the global infrastructure sector via shares in companies that operate in areas such as toll roads, rail, airports, ports, water, gas, electricity, energy and communications infrastructure. The nature of infrastructure assets means companies that operate in this sector typically enjoy high barriers to entry, strong pricing power and predictable cash flows.

"Investment in infrastructure has clear attractions during times of economic uncertainty," says Jason Hollands, managing director at Tilney Bestinvest. "These projects are typically underpinned by very long-term legally binding contracts which are often with state entities, so they provide very predictable revenues which often include annual inflation adjustments and they are not highly sensitive to the economic cycle."

This fund has demonstrated consistently good performance and is among the top-performing funds in the Investment Association (IA) Global sector over one and three years. It also beats its benchmark, FTSE Global Core Infrastructure 50/50 Index, over those periods.

The fund benefits from a well-resourced management team that specialises in infrastructure securities. Its lead manager, Peter Meany, has more than a decade of experience in the infrastructure sector and has managed the fund since its inception in 2007. And, according to FE Trustnet data, he has delivered a cumulative total return of 128.9 per cent over the past seven years, compared with 74.6 per cent for a composite of his peer group. Mr Meany's average annualised total return over nine years is 9.9 per cent.

Mr Meany and co-manager Andrew Greenup employ a bottom-up company selection process, which aims to find stocks with both value and quality characteristics. In particular they look for stocks where the market underestimates the level and quality of sustainable free cash flows.

They run a concentrated portfolio, with just over 40 holdings at present. Electric utilities are the largest sector exposure, accounting for almost a third of assets, and the fund also has a large weighting to highways and rail.

The fund focuses on developed markets, with over half of its investments listed in the US. The next largest country exposure is Japan, which accounts for 8 per cent of the portfolio. Infrastructure spending is likely to rise in both these countries following the Japanese government's recent fiscal stimulus, and as both US presidential candidates have advocated increased infrastructure investment.

Although the fund's exposure to US dollar-denominated assets has seen it perform strongly following the fall in sterling, there are also risks to having high exposure to the US.

Mr Hollands says: "I would feel a bit uncomfortable about buying dollar assets with our very weak pound at the moment, at a time when US shares are also quite expensive."

And because First State Global Listed Infrastructure invests in the shares of infrastructure companies rather than direct projects, its yield is lower than those offered by infrastructure investment trusts.

Nevertheless, Mr Hollands still rates First State Global Listed Infrastructure as a well-established fund that offers investors a way of getting exposure to the expected growth in infrastructure. And although it doesn't have the highest yield it has made very good total returns.

So, if you're looking to mitigate inflation and achieve good growth, then First State Global Listed Infrastructure's consistent good performance makes it a strong contender. Buy.

Source: Morningstar, as at 17/10/16, *First State Investments

Performance

Source: Morningstar as at 17 October 2016

Top 10 holdings as at 30/09/16 (%)

Source: First State Investments

Sector breakdown, as at 30/09/16 (%)

Source: First State Investments

IC Tip rating