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Buy inflation protection while HICL is at a low premium

HICL's inflation-linked infrastructure assets should be useful with inflation set to rise and it's trading at a lower than usual premium to NAV
December 8, 2016

Infrastructure investment trusts have been highly prized by investors for their low-risk access to predictable, inflation-linked income streams in recent years. As a result these trusts have often traded at extremely high premiums to net asset value (NAV), making them a pricey investment. IC Top 100 Fund , HICL Infrastructure 's (HICL) premium to NAV climbed to an eye-watering 27 per cent in August, for example.

IC TIP: Buy at 162.7pp
Tip style
Income
Risk rating
Medium
Timescale
Long Term
Bull points
  • Inflation-linked income
  • Direct exposure to infrastructure
  • Good performance record
  • Attractive yield
  • Premium lower than average
Bear points
  • Premium could fall further

But following the electoral victory of Donald Trump - whose policies are expected to increase inflation - investors have been dumping government bonds, and so called 'bond proxies' such as infrastructure assets have also been hit. As of 5 December, HICL's premium was down to 13.3 per cent, which was below its 12-month average of 16.8 per cent. This means it could be a good time to add it to your portfolio.

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