- Regulated with stable cashflows, high income and low GDP exposure
- Examples: poles, wires, pipes.
“An investor needs their income to be reliable, consistently delivered, and protected against inflation to some extent. Infrastructure is unique as an asset class because it has the potential to do all that.”
Charles Hamieh, Portfolio Manager
This fund is led by an infrastructure investment team, Nick Langley, Shane Hurst, Charles Hamieh and Daniel Chu based in Australia.
INFRASTRUCTURE INVESTING
The Extra.Ordinary potential of infrastructure investing is here
Much of the infrastructure that exists today is remarkable. It makes our lives easier and more enjoyable, but we barely give it a second thought. Now, investing in the infrastructure we take for granted can be a compelling option for investors as it can deliver more reliable income and it may stabilize your portfolio in times of inflation. Infrastructure, a truly extraordinary investment opportunity from the ordinary things we rely on every day.
What Are Infrastructure Assets?
Infrastructure assets are physical assets that provide an essential service to society. These are the services we use and interact with every day. For instance, we use gas, water and electricity to carry out our daily activities and infrastructure such as airports, rail and roads help to move people and goods from location to location.
In particular, we want to focus on 2 categories of infrastructure assets that can generate income for investors:
Regulated Assets
User Pays Assets
- Growth assets with lower income but leveraged to GDP, and affected by consumer demand
- Examples: roads, rail, ports, airports etc.
Why Should You Look into Infrastructure Investments?
Why Now
- Reliable income with companies’ cash flows underpinned by regulation or long-term contracts. Dividends from infrastructure assets act as an inflation hedge.
- Infrastructure’s focus on cash flows and underlying earnings make it a prudent investment as economic conditions deteriorate and a recession looms.
- Diversification with low correlation to most major asset classes.
Infrastructure is widely regarded as a comparatively low-risk asset class, with a longer-term investment horizon than other alternative investments.
Lower Volatility
Even at times of economic weakness, consumers continue to use water, electricity and gas, drive cars on toll roads and use other essential infrastructure services. This means lower volatility compared to asset classes such as equities and greater resiliency of revenues across business cycles.
Stable cash flows/dividends
Infrastructure companies provide predictable income distributions, as they are usually government regulated, and/or have long-term contracts that provide stable cash flow and greater capital stability. For investors, this provides excellent visibility for revenues and dividends.
Inflation hedge
Most infrastructure assets have an explicit link to inflation through regulation, concession agreements or contracts which provide inflation protection to investors.
Diversification
Infrastructure has a lower correlation to other asset classes. The underlying return streams are strongly linked to regulatory or contractual frameworks, rather than typical drivers of equity or bond returns and can provide diversification, especially in times of market stress.
Why Invest in the Franklin ClearBridge Global Infrastructure Income Fund?
Specific Income Objective for Income Seeking Investors
- Sustainable yield target underpins a competitive total return objective
- Essential nature of assets leads to more resilient cash flows/dividends
- The strategy's focus on listed infrastructure (regulated and user pays assets) offers the benefit of liquidity and flexibility of the public markets
Specialist Team Provides a Sustainable Competitive Advantage
- One of the largest teams in the infrastructure peer group
- Specialist expertise to exploit uncertainty around regulatory or political events
- More ability to source opportunities that may not be well covered by the market
Integrated Sustainability Framework
- Three-pillar approach focused on valuation, risk pricing and engagement
- Identifies both opportunities and risks
- Classified as Article 8 under the new Sustainable Finance Disclosure Regulation (SFDR) guideline
Proven Income Strategy Results Since 2010
- Top quartile performance over all timeframes
- Benchmark unaware portfolio construction provides the flexibility to manage through different environments
- A focus on risk as much as return. Strong upside/downside beta
An Integrated Approach to Sustainable Investing
The infrastructure team has incorporated Environmental, Social and Corporate Governance (ESG) factors into its process since inception1. The approach has remained consistent while the application has evolved over time.
Three-Pillar Framework
Valuation
- Fundamental cash flow impacts of sustainability actions are modelled
- Company specific growth prospects and strategic decisions, regulatory priorities and engagement with stakeholders
- Comparison of global regulatory approaches
- Industry-wide themes are applied consistently across companies (overseen by Sustainability Committee)
Risk Pricing
- Sustainability exposures and management/mitigation actions are assessed using internal and external resources
- Relative scoring across sub-industries
- Scoring reflects actions over five year investment horizon
- Stronger sustainability performers are rewarded with lower hurdle rate and vice versa
Engagement
- Ongoing engagement with boards and management on ESG issues
- Controversy monitoring
- Voting at company meetings
- Interaction with regulators and policy makers
- Engagement with third-party ESG experts
Investment Team
We pride ourselves for having a team of infrastructure specialists2 managing investments, and not investment managers managing infrastructure. The members of the team represent a diverse range of infrastructure specialist backgrounds including M&A and unlisted infrastructure, debt and equity financing, sell & buy side and government and regulation.
This fund is led by an investment team based in Australia.
- M&A and unlisted infrastructure
- Debt and equity financing
- Sell side and buy side
- Government and regulation
Nick Langley
Portfolio Manager
Shane Hurst
Managing Director, Portfolio Manager
Charles Hamieh
Managing Director, Portfolio Manager
Daniel Chu
Director, Portfolio Manager
