Discretionary fund manager City Asset Management is holding the First State global listed infrastructure fund in its Elite CAM balanced discretionary portfolio to benefit from its blend of infrastructure and global equities.
The First State fund invests in the equities of firms in the infrastructure sector and related sectors. CAM says it likes infrastructure because it provides asset backing and a clear inflation-proofed income stream but it is difficult to access.
There are a few limited liability partnerships and investment trusts that provide access to infrastructure but CAM says liquidity is an issue with those structures.
The First State fund solves that problem but as an equity fund, it does not provide 100 per cent exposure to infrastructure. CAM sees this as beneficial because it also likes global equity income, so can gain exposure to this, as well as infrastructure, through a single fund.
CAM says the yield on the First State fund is normally 4 to 5 per cent but this has recently fallen to between 3 and 4 per cent.
First State explained to CAM the fund could produce the usual 4 to 5 per cent yield but doing so would impact on the fund’s total return, which comprises income and growth. The manager is not prepared to chase yield under these circumstances.
CAM research director James Calder says: “The First State fund means the best of both worlds – asset backing, clarity in income stream and some exposure to global equities. The total return is swings and roundabouts because the fund can rise in absolute value if equity markets fall but will then lose income.”