HEAD-TO-HEAD: First State vs Morgan Stanley

123456

Investment approach

“The First State team are conservative investors, recognising that capital preservation is critical to achieving long-term capital growth,” said McDermott.

The fund invests in “hard” infrastructure such as bridges and ports around the world, through listed companies that own the assets. Of around 120 companies that the team has identified and monitor, 40 are included in the portfolio, comprising those that managers Andrew Greenup and Peter Meany believe can earn returns above consensus expectations.

“They prefer to invest in real infrastructure assets with high barriers to entry and strong pricing power’” said McDermott.

The managers also reckon that for infrastructure investments to deliver their full potential, other critical requirements are management alignment, independent boards, appropriate gearing, transparent regulation and cultures that are working to sustain their license to operate, he added.

The managers of the Morgan Stanley fund, Ted Bigman and Matthew King, adopt a value approach to investing, according to McDermott.

“As value-oriented, bottom-up driven investors, the duo’s investment perspective is that over the medium- and long-term, the key factor in determining the performance of infrastructure securities will be the underlying infrastructure asset values,” he said.

They also look for companies that can maintain a stable cash flow profile over time through high barriers to entry, he added.

Source: FE Fundinfo. Data in US dollars (21 February 2020)

Top 5 Holdings

Source: Fund factsheets, 31 January 2020

123456