Trillions of dollars need to be spent on rebuilding global infrastructure over the next 24 years, but which companies will be the unexpected winners? In this article, we highlight six funds that invest in major – and relatively unknown – businesses that could become major beneficiaries of this remarkable rebuilding boom.
Why is infrastructure attractive?
A staggering $151.1 trillion of capital is needed to build and maintain global infrastructure over the coming decades*. This spans clean energy, transport, digital networks, communications and utilities, creating opportunities across a broad range of sectors. Powerful structural trends are driving this demand. The rise of AI is increasing the need for data centres, power and digital infrastructure, while rapid urbanisation is transforming cities.
Over the next 25 years, Asia Pacific is expected to account for more than half of global infrastructure investment, with an additional 1.8 billion people expected to live in urban areas, predominantly in Asia Pacific and Africa, while the number of megacities will nearly double*. Climate change will also require more resilient transport and energy systems. Together, these trends could create significant opportunities for infrastructure companies and investors over the coming decades.
Please remember that the value of investments will fluctuate and returns may be less than the amount originally invested. Tax treatment depends on your individual circumstances and tax rules can change. Chelsea does not offer advice and so if you are unsure of anything please contact an expert adviser.
Six funds to consider
We have divided these into three areas: pure infrastructure-focused portfolios; global AI specialists; and broader Asia/emerging markets funds.
FTF ClearBridge Global Infrastructure Income
Our first suggestion, which is designed to provide a good income and stable growth, gives you exposure to the international infrastructure story. The fund combines regulated utilities and demand-based assets such as railways and toll roads. It’s also well diversified across geographic and sectoral allocations. Four experienced managers run the global infrastructure income strategy: Daniel Chu, Charles Hamieh, Shane Hurst and Nick Langley. Their holdings include Canadian National Railway**, a significant player within North American supply chains with a rail network covering 20,000 miles across Canada and mid-America.
TM Gravis UK Infrastructure Income
If you want more UK-focused exposure, it’s worth considering this fund, as it invests in equities, bonds, REITs, and investment companies. The fund was launched just over a decade ago and has an annual income target of 5%, delivered quarterly. We like the fact that it can also invest in debt infrastructure. The Renewables Infrastructure Group is one of its largest holdings***. This is an investment trust with a portfolio that embraces onshore/offshore wind farms, solar parks and battery storage projects. Another is Primary Health Properties***. This REIT invests in healthcare real estate, particularly GP surgeries and medical centres, that are let on long-term leases.
Landseer Global Artificial Intelligence
Technology companies involved in semiconductor manufacturing, cloud computing and data centres are among the biggest winners in the artificial intelligence boom. It’s why NVIDIA, Alphabet and Amazon are among the largest holdings in this portfolio**, which is co-managed by Chris Ford and Tim Day. However, this fund is unconstrained, so it doesn’t have to focus solely on tech giants. In fact, around 15% of the portfolio is in healthcare and other consumer-related sectors**. It also uses an artificial intelligence system itself to find companies whose business models are expected to benefit from this longer-term trend.
GQG Partners Emerging Markets Equity
The emerging markets are home to many businesses expected to see valuation hikes on the back of their involvement in infrastructure. These include AXIA Energia, which is involved in power generation, Taiwan Semiconductor Manufacturing, and Adani Power, which is linked to India’s electricity demand; all top holdings in this portfolio**. This fund, which seeks long-term capital appreciation, assesses companies based on financial strength, the sustainability of earnings growth, and the quality of management. Rajiv Jain, the lead manager, has more than 25 years’ investment experience. He favours a concentrated portfolio of high-quality companies with durable earnings.
Major infrastructure projects need to be financed – and this is the role played by some of the largest holdings in this fund**: Asian bank DBS Group Holdings and ICBC (the Industrial and Commercial Bank of China) are both heavily involved in bankrolling schemes. This equity fund invests in companies across the entire Asia Pacific region, including Australia, and favours a concentrated approach with just 36 equally-weighted stocks. We like the approach of focusing on companies that can sustainably grow their dividends, which makes it an attractive prospect for income seekers.
Fidelity Asia Pacific Opportunities
Techtronic Industries is this fund’s largest holding**. It supplies power tools and cleaning products to tradespeople working on infrastructure projects. The fund, which aims to increase the value of investments over at least five years, also has exposure to BHP and Zijin Mining, two materials producers**. Copper is a crucial ingredient offered by both companies, as it’s used in areas such as electrical grids, data networks, and renewable energy. Anthony Srom, the fund’s lead manager, has a high-conviction approach but balances his risk by ensuring that the portfolio is well diversified.
