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Ex-British Steel pension fund manager launches infrastructure fund

Ex-British Steel pension fund manager launches infrastructure fund
In an environment of rising inflation, infrastructure can provide investors with income and growth, says Miton’s Jim Wright as he launches a new fund investing in the asset class.

Wright, who previously ran the British Steel Pension fund, said the Miton Global Infrastructure Income fund will be able to invest in a broader range of asset than some of its rivals, taking advantage of individual utility and telecoms stocks.

‘Other funds and benchmarks are restricted to wireless towers and networks,’ said Wright. ‘I can invest in Vodafone and see these as infrastructure so that represents some interesting opportunities…that will be a key difference.’

He said his overall investment style commits him to investing in companies with a ‘stable underlying income, based on long-term, long-duration assets, and limited cyclicality’.

The model portfolio he has recently run currently has a dividend yield of 4% but he expects the yield on the fund will be slightly higher than this when then the fund is launched.

The 42 stocks in the portfolio will be biased towards North America where US president Donald Trump has pledged to spending $1 trillionon infrastructure. The fund has a 60% weighting to the region.

The biggest holding will be in Enbridge, at 6%, which is North America’s number one energy company following its merger with Spectra Corp last month.

The second largest stock in the portfolio is US electricity and gas utility company Xcel Energy, which operates over eight states and has delivered annual dividend growth of 6.7% since 2013.

Although the fund will be predominantly invest in US stocks, there are five UK-based companies that have made the grade.

‘The National Grid stock is going to be core,’ said Wright. He said it was ‘interesting’ that the market missed the sale of 61% of National Grid’s business to a Macquarie-led consortium last year for a ‘huge premium’.

Another stock Wright believes was being ‘underestimated’ is energy company SSE. He said the company is recycling money into offshore and onshore wind farms. ‘Prices are going sky high for projects like that and it is a very cheap stock,’ he said.

Pennon Group, owner of South West Water, has also made it on to Wright’s list, with the manager describing it as ‘a very stable and some may say very dull asset’.

‘It has very good inflation-linked returns and it also has a waste management company called Viridor that did have some issues but there will be good growth going forward,’ he said.

Wright said 60% of the portfolios assets would be linked to inflation which meant its income and growth should deliver positive returns in real terms to investors.

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