HEAD-TO-HEAD: First State vs Morgan Stanley

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Source: FE Fundinfo (cumulative returns in US dollars)

Performance

“The First State Global Listed Infrastructure Fund is widely acknowledged as a leader in the listed infrastructure investment space,” said McDermott.

Although, the Hong Kong share class has only been available since 2016, he analysed the fund’s UK strategy to assess its performance over a longer 10-year period.

“It has been excellent over the longer period,” he concluded.

The fund has generated a 145.75% cumulative return during the past decade, compared with 75.29% by its sector average, according to FE Fundinfo data.

Over a shorter period, it has outperformed its peers too, posting better calendar year returns in both up- and down-markets. Its three-year cumulative return in US dollar terms is 32.98%, compared with 28.76% for the sector average.

The Morgan Stanley fund’s three-year cumulative performance of 33.14% is actually slightly better than the First State fund’s return, in US dollar terms, according to FE Fundinfo data. The funds have similar annualised volatilities of 9.41% and 9.34% respectively

“Both funds are slightly less volatile than the wider global stock market. For instance, in the fourth quarter 2018, when markets around the world fell significantly, both funds fell less,” said McDermott.

However, the First State fund’s investment strategy and style gives it an edge over its Morgan Stanley rival, according to McDermott.

“It can invest in a broad spectrum of infrastructure companies and, with about 65% active share, can really add alpha,” he said.

“It also has the flexibility to move around, depending on the economic climate, for example focusing on more economically sensitive assets, as a way of insulating it from the potential impact of rising interest rates,” he explained.

“In contrast, the Morgan Stanley fund has a more value-oriented style, and it has a much lower active share, so it tends to track its Dow Jones Brookfield Global Infrastructure Index benchmark very closely,” he added.

It has a high concentration in the oil and gas sector, whereas the First State fund is more diverse, with a bias towards utilities.

Discrete annual performance

Source: FE Fundinfo

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