JPMORGAN GLOBAL CORE REAL ASSETS: Infrastructure fund builds raft of steady profits
Prime Minister Boris Johnson and Chancellor Rishi Sunak recently called for Britain’s pension funds to put their weight behind the UK economy by investing more of their money in big infrastructure projects.
Their call to infrastructure arms was made earlier this month in a letter to investment managers. ‘It’s time we recognised the quality that other countries see in the UK,’ they said, ‘and back ourselves by investing more money into the companies and infrastructure that will drive growth and prosperity across our country.’
A number of investment managers – including 3i, HICL and GCP – already run stock market listed funds that invest in infrastructure projects. For example, the £3.3billion HICL Infrastructure fund, a component of the FTSE250 Index, generates a steady stream of income for shareholders from a global portfolio of assets.
In the UK, its investments include the operation of a maximum security jail (Addiewell) on behalf of the Scottish Prison Service – and a hospital and three mental health facilities on behalf of two Birmingham NHS foundation trusts.
The result is a trust that is providing investors with a steady quarterly income – equivalent to 4.7 per cent a year – unaffected by lockdowns and the pandemic.
While HICL Infrastructure has been around for 15 years, investment trust JPMorgan Global Core Real Assets is in its infancy. It was launched in September 2019 to invest not only in income generating infrastructure projects, but also real estate (commercial property) and transport (container ships and trains).
It has taken a while for the trust to make its investments – not helped by the pandemic – but it is now nigh on fully invested.
The result is an uptick in the quarterly dividend payments it is making – one penny per share compared to 0.75pence a year ago – and the promise of more income in the pipeline.
Philip Waller, part of the management team, says the trust’s target income is between four and six per cent a year with the opportunity for a little capital growth on top.
‘We see this trust primarily as a good portfolio diversifier for someone looking for income,’ he says. ‘It’s investing in a spread of assets that are uncorrelated to each other, and to other financial assets such as equities.
‘Further diversity comes from the fact that it has both unlisted and listed holdings and has exposure to nearly 650 infrastructure and transport assets and more than 200 real estate buildings. The portfolio is truly global.’
Three per cent of the fund is in UK assets. The income comes from the leasing of assets such as container ships, trains and industrial units, as well as investments in renewable energy projects. Among its top holdings is a stake in US real estate trust Prologis, which specialises in logistics facilities. Alan Brierley, an analyst at Investec Bank, recently issued a ‘buy’ note on the trust. This is after rating it a ‘sell’ as a result of the long time it was taking the managers to make its investments – and the share price trading at a premium to the value of the trust’s underlying assets.
But with these issues largely resolved – the trust’s premium is down to a reasonable 5.3 per cent – Brierley believes the JPMorgan fund provides investors with an important source of income diversification which should show ‘defensive characteristics in more turbulent market conditions’.
The trust has assets valued at £200million, its stock market identification is BJVKW83, and annual charges total 0.71 per cent. Although the current share price of 93p is below the £1 launch price, Brierley believes the prospects for asset growth and attractive dividends are encouraging.