M&G Global Listed Infrastructure: Racy? “We have a more solid foundation,” says the foundation’s boss, Alex Araujo
Alex Araujo is the first to admit that there is nothing special about the fund he manages. The M&G Global Listed Infrastructure Fund is a portfolio of refineries, LNG terminals, toll roads and laboratories.
Araujo looks for these and other solid assets that generate reliable income and then holds them for years.
The spiciness has fallen out of favor over the past few months. The most exciting investment is a sharp drop in stock prices as investors get nervous about businesses that promise incredible returns but have yet to show their value. A good example is US technology stocks, which have fallen about 26 percent in value since the beginning of the year.
Today, it is steady and slow, which is especially worrying for investors. Araujo believes that it is in this new turbulent environment of rising interest rates and volatility that infrastructure funds can really show their value.
M&G Global Listed Infrastructure is a concentrated portfolio of 40-50 companies that Araujo and his team believe can sustainably grow their income over the long term.
They very rarely change the structure of the portfolio: most of the shares of the fund have been there since its inception in 2017. Today, the £572m fund has stakes around the world: 36 per cent in US companies, 16 per cent in Canada, 10 per cent in Britain and 9 per cent in Italian companies.
The fund turned an investment of £1,000 into £1,252 over three years and is up 8.1 per cent over the past year. In addition, it has a dividend yield of more than 2 percent. Araujo believes that part of the fund’s success is that it invests in companies that are resistant to high inflation.
“These companies tend to be able to pass inflation on to their customers,” he says. “Some companies benefit directly from inflation. For example, we are investing in energy infrastructure, the cost of which has increased with the rise in energy prices.”
The fund’s leading holdings include the Canadian pipeline and oil storage company and oil refinery Gibson Energy, as well as the German utility company Eon.
Araujo expects dividends from these types of energy companies to continue to grow. “They have reliable income streams from critical assets that we depend on every day,” he says.
In addition, in response to the economic impact of Covid 19, governments around the world have committed to infrastructure projects that will support the growth of the sector even in a recession. In the US, President Biden has committed more than $2 trillion (£1.7 trillion) to infrastructure programs, while in Europe, the next-generation EU has ambitions to promote renewable energy and clean transport.
Although Araujo rarely interferes with the portfolio, he is always looking for a deal. The March 2020 market crash at the start of the pandemic was a particularly stressful time as he and his team bought six new companies. One of them was A2A, a northern Italian multi-utility business.
Araujo says: “If you think back to the newsreels in Italy at the time, the military was on the streets, people were in biohazard suits, hospitals were filling up – there was real panic. But [the investment] we succeeded.”
The stock fell to €1.02 at the end of March and peaked at €1.93 in October 2021. Today they are trading at €1.22. Shares in the M&G Global Listed Infrastructure fund trade at around £1.60 and have an annual charge of 0.7 per cent. The stock market ID is BF00R92.