Franklin ClearBridge
Sustainable Global
Infrastructure
Income Fund

A true differentiator for income-seeking investors


Income needs are as critical as ever, but uncertainty about inflation and yields has created challenges for investors who are seeking income from their investments. Investors can consider alternative income generating solutions such as infrastructure, for a true differentiator from traditional income solutions.

Nick Langley, Portfolio Manager of the Franklin ClearBridge Sustainable Global Infrastructure Income Fund, discusses the benefits and long-term potentials of the infrastructure sector in this video.

Portfolio Manager Charles Hamieh joins Matt Bushby for a discussion of how the team analyzes the return profiles of infrastructure companies across the globe, from user-pays assets such as rails and airports to regulated utilities.


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
Regulated Assets
  • Regulated with stable cashflows, high income and low GDP exposure
  • Examples: poles, wires, pipes.
User Pays Assets
User Pays Assets
  • Growth assets with lower income but leveraged to GDP, and affected by consumer demand
  • Examples: roads, rail, ports, airports etc.

What will drive growth in the infrastructure sector?

Infrastructure spending is expected to grow in both developed and emerging economies. In developed economies, an increased need for maintenance, facilities upgrades, capacity boosts as well as the embracement of sustainability will escalate infrastructure expenditure. Meanwhile in the Emerging Markets, expected increase in population growth and urbanisation will similarly facilitate the expansion of infrastructure. By 2050, 68% of the world’s population is projected to be urban compared with 55% in 2018.1

Estimated Global Infrastructure Spending 2018-20402

USD 20 trillion

investment in electricity supply/efficiency


Developed Markets

USD 8.4 trillion

in regulated/contracted generation (gas, solar, wind)

Developed Markets

USD 8.6 trillion

in networks/storage



Developed Markets

Why Should You Look into Infrastructure Investments?

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 Sustainable Global Infrastructure Income Fund?

Specific Income Objective for Income Seeking Investors

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

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

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

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 inception4. The approach has remained consistent while the application has evolved over time, which is important in a world moving towards ESG-investing becoming mainstream, and not just a good-to-have.

Three-Pillar Sustainability 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 specialists3 managing investments, and not investment managers managing infrastructure.

Nick Langley

Nick Langley

Managing Director,
Portfolio Manager,
Years industry experience: 26

Shane Hurst

Shane Hurst

Managing Director,
Portfolio Manager,
Years industry experience: 23

Charles Hamieh

Charles Hamieh

Managing Director,
Portfolio Manager,
Years industry experience: 23

Daniel Chu

Daniel Chu

Director,
Portfolio Manager,
Years industry experience: 13


Members of the team represent a diverse range of infrastructure specialist backgrounds:

  • M&A and unlisted infrastructure
  • Debt and equity financing
  • Sell side and buy side
  • Government and regulation

Insights