Trustnet Magazine 59 February 2020 - Page 62

In the back 62 / 63 [ WHAT I BOUGHT LAST ] The focus of the team is on assets the UK will find indispensable in the years ahead, including schools, student accommodation and energy generation Albemarle’s Charlie Parker says this fund offers access to property- like returns without the liquidity risk associated with owning the asset class in an open-ended fund VT Gravis Infrastructure Income A s the economic environment stabilises, there is some emerging evidence of inflation returning around the world. With this in mind, assets that have the potential to deliver inflation-protected returns over the long term are beginning to look valuable. We recently added VT Gravis Infrastructure Income to our portfolios. The fund’s aim is to deliver regular income, preserve capital and protect against inflation through a portfolio of UK-listed infrastructure investments, predominantly UK TRUSTNET REITs. Its yield target is 5 This positions the fund per cent a year. towards holdings such as hospitals leased by the Linked in government and away Of crucial importance from those infrastructure with infrastructure investments that rely investments is finding on consumer demand holdings where – such as toll roads – to the majority of the drive their revenues. underlying revenue The focus of the team is linked to inflation. is on assets the UK will For example, owning find indispensable in the assets that are leased years ahead, including for the long term with schools, student inflation-protected accommodation and contracts. This fund energy generation. This seeks to achieve this aim has led it to invest in by holding a minimum cornerstone UK assets of 75 per cent of assets in such as Heathrow Airport infrastructure projects and Thames Water. that are supported by We believe this fund contracts from the UK offers a good trade-off government, either at a by providing access to local or national level. property-like returns in the UK but without the liquidity risk associated with owning the asset class within an open- ended fund. The fund has a correlation of just 0.4 to the UK equity market over the past 12 months, a relatively low figure. Looking up There had been concerns last year that infrastructure would be at risk from a Jeremy Corbyn- led government, due to the Labour leader’s enthusiasm for nationalisation. However, the Conservative victory in the general election has led to renewed optimism in the sector, with the fund’s manager Will Argent pointing out the party has made clear its support for existing PFI concessions. Investors should be cautious as this fund’s assets grow. Ultimately it owns closed-ended funds which can trade on relatively wide spreads. For this reason, the liquidity profile requires careful monitoring. Yet we believe the fund offers a more diversified means of accessing some of the niche closed- ended vehicles in the UK than buying them directly. It has some 30 holdings and therefore provides for a greater level of liquidity than, for example, owning the specific closed-ended funds that invest in GP surgeries or care homes, which deliver a similar return profile with more idiosyncratic risks. Charlie Parker is managing director at Albemarle Street Partners