Fund Manager Update – December 2020
A Rare find
Infrastructure is one of the key components of the Alternatives asset class in Carnbrea’s model portfolios. We believe that a meaningful exposure to infrastructure assets can assist in providing diversification and lower volatility, whilst rewarding investors with regular income and capital growth over the medium term.
We have recently revised our infrastructure asset class exposure, replacing Magellan Infrastructure Fund (Unhedged) with the RARE Infrastructure Income Fund (Hedged) on the back of strong returns, compelling ESG characteristics and a diversified portfolio that has stood the test of time.
The Fund invests in a portfolio of global listed infrastructure securities and aims to provide investors with a regular and stable income of 5% p.a. through an investment cycle; comprised of dividends, distributions and interest, and capital appreciation. Additionally, the fund’s currency hedged exposure enhances the defensive characteristics of infrastructure asset class in the portfolio and is in line with our view of a reduced upward pressure on the Australian dollar going forward.
For the 3mth ending 30-Nov-20, the fund generated an excess return of 0.75% over the S&P Global Infrastructure TR index (AUD hedged) index. Longer term performance has also been robust; the fund has produced excess returns of 9.58% and 5.01% over the 3- and 5-year periods respectively. During the same time period, it has also exceeded it income return target.
Importantly, the fund has consistently ranked in the top 4 funds across all time periods and has secured the highest position in the 6mth, 1yr, 3yr and 5yr ranks, using a peer universe of 18 currency hedged and unhedged managed funds and ETFs.
The fund currently holds a total of 38 securities, in a balanced combination of regulated and user pays/contract assets, and developed and emerging markets. We believe this diversified approach provides Rare an optimal opportunity to position itself for all stages of an economic cycle and hold well against an inflationary pressure.
Rare employs a three-pillar sustainability framework for incorporating ESG factors into its investment policy. The process involves modelling fundamental cash flow impacts of sustainability actions, assessing sustainability exposures and management mitigation actions including relative time series and cross-sectional scoring, and finally active engagement with board and management on ESG issues. The fund currently holds 15% in Renewables assets and 03 out of the top 10 holdings are renewables focused.
As the world leaders focus on ‘building back better’ the Covid-19 desolated economies, infrastructure spend will be an essential tool in their arsenal for targeting economic growth.
Given its diversified portfolio, strong to-date performance and a structured ESG approach to investing, we find Rare to be a strong beneficiary of the economic recovery and a fitting addition to our model portfolio suite.
For further information and guidance, please contact us here.
This information is provided by Carnbrea & Co Limited ABN 33 004 739 655, Australian Financial Services Licence No. 233763. Any advice included in this document is general in nature and does not take into account your objectives, financial situation or needs. Before acting on the advice, you should consider whether it is appropriate to you. If a product we recommend has a Product Disclosure Statement (PDS) or a Prospectus, you should read it before making a decision. Past performance is not a reliable indicator of future performance. Derivatives are leveraged products which means gains and losses are magnified and you may lose substantially more than your initial investment. We do not endorse any information from research providers that we provide to you, unless we specifically say so.