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Product matters

OK, I too thought infrastructure sounded a really rather dull topic but when you dig a little deeper, you realise that First State could be on to something with its global infrastructure fund.

What constitutes infrastructure? It gives the manager a wider remit than you might think as it encompasses both economic and social infrastructure.

Economic infrastructure is wide ranging and refers to services for which the user typically pays such as transport (toll roads, airports, seaports and freight rail), power (gas and electricity generation, distribution and transmission) and water (supply, sewerage and drainage).

However, social infrastructure is generally subsidised and covers such public services as education, healthcare facilities, law and defence facilities and passenger rail facilities.

The portfolio consists of a reasonably concentrated 30-50 holdings selected from a universe of about 900 stocks, with a truly global spread. Bottom-up stock selection is aided by ranking them one to five, with reference to 20 different criteria which influence infrastructure stocks, to give a total out of 100. The yield is 3.7 per cent at launch.

This is an excellent portfolio diversifier. A fund for the long term and one that should prove defensive. With other asset classes sharing the same characteristics now looking fairly fully valued, could this be an alternative to owning a UK property fund?

Darius McDermott is managing director of Chelsea Financial Services


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