A new global listed infrastructure fund launched by Russell Investments and seeded by FAF Advisors (FAF) will be expanded to a multi-manager structure over time.
Russell’s Global Listed Infrastructure Fund, launched yesterday, will hold between 100 and 125 individual securities with exposures to a range of sectors including utilities, transportation, pipelines and energy.
Bruce Eidelson, director, real estate securities at Russell Investments, said the fund would construe infrastructure quite broadly to include sectors which aren’t represented in the benchmark (such as waste and alternative energy), with the objective of providing as broader diversification in the infrastructure segment as possible.
The fund is benchmarked against the S&P Global Infrastructure Index, which returned -38.98 per cent in the 12 months to 31 December but has since recovered ground, posting a 12.84 per cent return year-to-date. Foreign currency exposures are hedged back to Australian dollars.
“We will launch initially with a single manager with the intent to expand to a multi-manager structure over time,” he said.
“The fund will focus primarily on the lower risk elements of infrastructure, including mature developed markets, brownfield developed markets and to a lesser extent mature emerging markets. Emerging markets exposure would generally be at or below 10 per cent of the total fund assets.”
Eidelson said Russell had held initial conversations with consultants, and anticipated appetite for listed infrastructure from super funds despite many questioning the viability of the infrastructure model in the aftermath of the financial crisis and the collapse of many local infrastructure vehicles
“We think there’s a strong interest in alternatives generally, and certainly the characteristics of this sector or asset class are in our view in sync with what many investors are looking for, which is stable income, real assets exposure, potentially even inflation protection to the extent that inflation were to appear significantly, and diversification,” he said.
“Many of the issues that came up in this most recent crisis revolved around the high gearing levels of those companies and what we’re focussing on here is the character of the underlying infrastructure assets which continue to present certain benefits in terms of stability of income.”
In the electricity utilities sector, Eidelson said the focus is more on transmission and distribution than generation.
“So the focus for our fund as well as infrastructure investors generally should be more on assets with stable performance characteristics in minimising to the extent possible exposure to the commodities price cycle, which is why there’ll be a preference for the transmissions and distribution side of the business as opposed to the electricity generation side,” he said.