A look at HK’s few infrastructure funds

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Infrastructure funds are continuing to attract substantial inflows, but there are not many options available to retail investors.

Investors raised exposure to infrastructure funds last year in pursuit of higher returns and portfolio diversification.

A record $85bn was allocated to infrastructure funds, up $10bn on 2017, according to Preqin, an alternative assets data provider, which expects the amount to be even higher this year.

These funds help finance the building and management of toll roads, airports, energy grids, water and sewerage systems, hospitals, prisons and public buildings.

In the decade since the financial crisis, investors have sought new and different strategies such as infrastructure products which are away from the traditional asset classes of listed stock and bond markets.

However, most fund raisings have been for private firms soliciting subscriptions from professional investors. Prominent names include Macquarie and private-equity groups Blackstone and KKR.

There are a half-a-dozen infrastructure funds authorised for sale to retail investors in Hong Kong and Singapore, but their performance perhaps doesn’t warrant any claims for achieving diversified, incremental returns over conventional asset classes.

Investors would have been better off putting their savings into a fund that tracked the S&P 500.

On the other hand, although returns have not been spectacular, nor has their volatility. Investors have had a smoother ride in infrastructure funds than those in S&P index trackers.

Nevertheless, the best performer over three years is the $57m Franklin Global Listed Infrastructure Fund, which has a 28% cumulative return. Its major holdings range across infrastructure sectors, including Auckland International Airport and energy companies such as TransCanada and Sempra Energy.

The next best performers are the $1.18bn First State Global Listed Infrastructure Fund (24%) and the $921m Morgan Stanley Global Infrastructure Fund (23%). Both have diverse holdings that include energy utilities, toll-road operators and construction companies.

All three funds are highly rated by FE Analytics, which awards them five crowns – and alpha manager ratings to the co-managers of the First State Fund.

In Hong Kong’s retail (SFC-registered) universe, the six funds in the infrastructure category together had an average 24% three-year cumulative return.


 

Top Three Infrastructure Funds Comparative Performance

Fund

Annual Return%Volatility %

*Sharpe Ratio

Franklin Global Listed Infrastructure

9.6710.13

0.61

First State Global Listed Infrastructure

8.90

10.14

0.53

Morgan Stanley Global Infrastructure

8.09

9.87

0.47

Equity Infrastructure Sector Average

7.63

9.68

0.43

S&P 500

13.88

12.65

0.82

*The higher a portfolio’s Sharpe ratio, the better its risk-adjusted performance.
Source: FE Analytics. Measurements are over three years and in US dollars. S&P 500 data included for comparison purposes only.

 

SFC registered infrastructure funds vs the S&P 500

Source: FE Analytics. Three-year cumulative performance in US dollars. S&P 500 index shown for comparative purposes only.

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