Investment Strategy

Investment strategy

The investment strategy will take a high conviction, active approach and, while the Portfolio Manager expects to progressively invest the Portfolio within a period of 30 days, given the significant size of the infrastructure investment universe, the Portfolio Manager expects rapid deployment of capital. The Portfolio Manager further expects that, consistent with the active nature of the Portfolio, approximately 50% of the Portfolio’s investments will be turned over in any given 12 month period. It is anticipated that the Portfolio will be concentrated across 50 - 100 securities, with 80% - 100% of the Portfolio invested in global listed infrastructure securities, and 0% - 20% invested in global infrastructure fixed income securities. The Portfolio will be further diversified across infrastructure sub-sectors and countries, both developed and emerging, based upon the combined top-down and bottom-up analysis undertaken by the Portfolio Manager. Up to 5% of the Portfolio’s NAV may be held in cash securities from time to time, the timing and level of cash holdings will ultimately be determined by the attractiveness of available securities.

Components of the Company’s Investment Strategy

Description

Global listed infrastructure securities

Provides access to the proven investment philosophy and process of the Portfolio Manager, an award winning global investment manager, specialising in listed infrastructure.

Opportunity to gain diversified exposure to global listed infrastructure securities, outside of the limited opportunity afforded by ASX-listed infrastructure securities.

Disciplined top-down screen of the global infrastructure universe to identify attractive sub-sectors, coupled with detailed bottom-up analysis of individual securities.

Up to 20% invested in global infrastructure fixed income securities

Provides potential to enhance the dividend income profile of the Portfolio above what may be achievable through investments in only infrastructure securities.

Dynamic approach to Portfolio weighting, determined by an asset allocation committee of the Portfolio Manager, which meets regularly to discuss the relative attractiveness of various asset classes, based on fundamentals and valuations.

Combined top-down and bottom-up approach to portfolio construction, focusing on credit quality, duration objectives, security structures, and company and sub-sector fundamentals.

Up to 5% invested in cash securities

Provides additional flexibility for the Portfolio Manager to pursue anticipated market opportunities.

However, given the high conviction approach and size of the infrastructure universe, holdings in cash securities are likely to be kept to a minimum.

Exposure to be determined by the attractiveness of available securities, particularly from a valuation perspective.

The Portfolio Manager has provided a “model portfolio” of global listed infrastructure securities in accordance with the Company’s investment guidelines, with weightings across country and sub-sector as outlined in the charts below. The “model portfolio” does not reflect information about any particular fund or account managed or serviced by the Portfolio Manager, and the composition of the Company’s Portfolio may be materially different from the portfolio weights shown below.

Model Portfolio Diversification by Country[1]

Model Portfoio Diversification by Sub-Sector[2]

Source: Cohen & Steers as at 31 March 2015.


[1] As at 31 March, 2015. “Other” includes Chile, China, Hong Kong, Mexico, Singapore, South Korea and Switzerland. Due to rounding, values may not add up to 100%.

[2] As at 31 March, 2015. “Other” includes Airports, Satellites, Shipping and Water. Due to rounding, values may not add up to 100%.

The Portfolio Manager believes that its strategy offers a value-added total return approach to investing in global infrastructure, an asset class that has historically been characterised by attractive and stable income, strong total returns, low volatility and low correlations to broader equity and fixed income markets. Investors in global listed infrastructure gain diversification across infrastructure sub-sectors and countries without needing to commit the high levels of capital required to achieve similar diversification through direct infrastructure investments.

The Portfolio Manager expects significant growth in the breadth of listed infrastructure investment opportunities, driven in part by historical underinvestment in infrastructure, economic growth in emerging markets, increased reliance on private industry for the provision of infrastructure services, growing demand for infrastructure assets globally and increased investor awareness and participation in the asset class. Furthermore, the Portfolio Manager believes that global listed markets are inherently inefficient, in part due to regulation, industry fundamental cycles and securitisation of the asset class, and provide opportunities for active investment managers to add value.

The Portfolio Manager believes that success in global listed infrastructure investing requires a balance of top-down industry sector research and bottom-up specific company analysis. By investing in core owners and operators of infrastructure assets, the Portfolio Manager believes that the investment strategy offers value-oriented investment characteristics such as predictable, often inflation-linked cash flows, and strong diversification benefits. The Portfolio Manager employs a dedicated and experienced investment team to provide coverage of the universe of infrastructure securities and quantify how macroeconomic and industry trends will impact the critical variables that influence valuation.

The Portfolio Manager’s investment process has delivered successful results over time, and its investment philosophy has remained consistent since inception in 2004.