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Income needs are as critical as ever, but uncertainty about inflation and yields has created challenges for investors who are seeking income from their investments. Investors can consider alternative income generating solutions such as infrastructure, for a true differentiator from traditional income solutions.

What Are Infrastructure Assets?

Infrastructure assets are physical assets that provide an essential service to society. These are the services we use and interact with every day. For instance, we use gas, water and electricity to carry out our daily activities and infrastructure such as airports, rail and roads help to move people and goods from location to location.

In particular, we want to focus on 2 categories of infrastructure assets that can generate income for investors:

Regulated Assets

  • Regulated with stable cashflows, high income and low GDP exposure
  • Examples: poles, wires, pipes.

User Pays Assets

  • Growth assets with lower income but leveraged to GDP, and affected by consumer demand
  • Examples: roads, rail, ports, airports etc.

What will drive growth in the infrastructure sector?

Infrastructure spending is expected to grow in both developed and emerging economies. In developed economies, an increased need for maintenance, facilities upgrades, capacity boosts as well as the embracement of sustainability will escalate infrastructure expenditure. Meanwhile in the Emerging Markets, expected increase in population growth and urbanisation will similarly facilitate the expansion of infrastructure. By 2050, 68% of the world’s population is projected to be urban compared with 55% in 2018.1

 

Estimated Global Infrastructure Spending 2018-20402

USD 20 trillion

investment in electricity supply/efficiency

USD 8.4 trillion

in regulated/contracted generation (gas, solar, wind)

USD 8.6 trillion

in networks/storage

Why Should You Look into Infrastructure Investments?

Infrastructure is widely regarded as a comparatively low-risk asset class, with a longer-term investment horizon than other alternative investments.

Lower Volatility 

Even at times of economic weakness, consumers continue to use water, electricity and gas, drive cars on toll roads and use other essential infrastructure services. This means lower volatility compared to asset classes such as equities and greater resiliency of revenues across business cycles.  

Stable cash flows/dividends

Infrastructure companies provide predictable income distributions, as they are usually government regulated, and/or have long-term contracts that provide stable cash flow and greater capital stability. For investors, this provides excellent visibility for revenues and dividends.

Inflation hedge

Most infrastructure assets have an explicit link to inflation through regulation, concession agreements or contracts which provide inflation protection to investors. 

Diversification

Infrastructure has a lower correlation to other asset classes. The underlying return streams are strongly linked to regulatory or contractual frameworks, rather than typical drivers of equity or bond returns and can provide diversification, especially in times of market stress. 

Nick Langley, Portfolio Manager of the FTGF ClearBridge Global Infrastructure Income Fund, discusses the benefits and long-term potentials of the infrastructure sector in this video.

Why Invest in the FTGF ClearBridge Global Infrastructure Income Fund?

Specific Income Objective for Income Seeking Investors

  • Sustainable yield target underpins a competitive total return objective
  • Essential nature of assets leads to more resilient cash flows/dividends
  • The strategy's focus on listed infrastructure (regulated and user pays assets) offers the benefit of liquidity and flexibility of the public markets

Specialist Team Provides a Sustainable Competitive Advantage

  • One of the largest teams in the infrastructure peer group
  • Specialist expertise to exploit uncertainty around regulatory or political events
  • More ability to source opportunities that may not be well covered by the market

Integrated Sustainability Framework

  • Three-pillar approach focused on valuation, risk pricing and engagement
  • Identifies both opportunities and risks
  • Classified as Article 8 under the new Sustainable Finance Disclosure Regulation (SFDR) guideline

Proven Income Strategy Results Since 2010

  • Top quartile performance over all timeframes
  • Benchmark unaware portfolio construction provides the flexibility to manage through different environments
  • A focus on risk as much as return. Strong upside/downside beta 

Investment Team

We pride ourselves for having a team of infrastructure specialists3 managing investments, and not investment managers managing infrastructure. The members of the team represent a diverse range of infrastructure specialist backgrounds including M&A and unlisted infrastructure, debt and equity financing, sell & buy side and government and regulation.

  • M&A and unlisted infrastructure
  • Debt and equity financing
  • Sell side and buy side
  • Government and regulation

Nick Langley

Portfolio Manager

Shane Hurst

Managing Director, Portfolio Manager

Charles Hamieh

Managing Director, Portfolio Manager

Daniel Chu

Director, Portfolio Manager

An Integrated Approach to Sustainable Investing

The infrastructure team has incorporated Environmental, Social and Corporate Governance (ESG) factors into its process since inception4. The approach has remained consistent while the application has evolved over time, which is important in a world moving towards ESG-investing becoming mainstream, and not just a good-to-have.

Three-Pillar Sustainability Framework

Valuation

  • Fundamental cash flow impacts of sustainability actions are modelled
  • Company specific growth prospects and strategic decisions, regulatory priorities and engagement with stakeholders
  • Comparison of global regulatory approaches
  • Industry-wide themes are applied consistently across companies (overseen by Sustainability Committee)

Risk Pricing

  • Sustainability exposures and management/mitigation actions are assessed using internal and external resources
  • Relative scoring across sub-industries
  • Scoring reflects actions over five year investment horizon
  • Stronger sustainability performers are rewarded with lower hurdle rate and vice versa

Engagement

  • Ongoing engagement with boards and management on ESG issues
  • Controversy monitoring
  • Voting at company meetings
  • Interaction with regulators and policy makers
  • Engagement with third-party ESG experts

A Quick Summary

Why should you invest in FTGF ClearBridge Global Infrastructure Income Fund?

  • Sustainable income target plus the potential for capital growth
  • Stable income, growing dividend per share (DPS) and lower beta to global equities
  • Highly competitive performance and risk metrics compared to key infrastructure peers
  • Cash flows underpinned by regulation or long-term contract rather than the economic cycle
  • An integrated approach to sustainable investing
Fund Details

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Footnotes

  1. Source: United Nations Department of Economic and Social Affairs, Population Division, Revision of World Urbanization Prospects 2018, as of 16 May 2018. Most recent data available. There is no assurance that any projection, estimate or forecast will be realised.
  2. Source: ClearBridge. International Energy Agency, (2018), World Energy Outlook, iea.org/weo2018/electricity, as of November 2018. There is no assurance that any projection, estimate or forecast will be realised.
  3. Source: ClearBridge, as at 31 December 2020.
  4. Source: ClearBridge, as at 31 December 2020. 

Investment Risks

The fund does not offer any capital guarantee or protection and you may not get back the amount invested.

Investment in company shares: The fund invests in shares of companies, and the value of these shares can be negatively affected by changes in the company, its industry or the economy in which it operates.
Investment in infrastructure: The fund invests in shares of infrastructure companies, and the value of these shares can be negatively affected by economic or regulatory occurrences affecting their industries. Investments in new infrastructure projects carry risks where they may not be completed within the budget, agreed timeframe or specifications. Operational and supply disruptions can also have a negative effect on the value of the company’s shares.
Emerging markets investment: The fund may invest in the markets of countries which are smaller, less developed and regulated, and more volatile than the markets of more developed countries.
Concentrated fund: The fund invests in fewer companies than other funds which invest in shares usually do. This means that the fund does not spread its risk as widely as other funds and will therefore be affected more if an individual company has significant losses.
Fund currency: Changes in exchange rates between the currencies of investments held by the fund and the fund’s base currency may negatively affect the value of an investment and any income received from it.
Derivatives: The use of derivatives can result in greater fluctuations of the fund’s value and may cause the fund to lose as much as or more than the amount invested.
Sustainability: The fund’s integration of sustainability risks in the investment decision process may have the effect of excluding profitable investments from the investment universe of the fund and may also cause the fund to sell investments that will continue to perform well. A sustainability risk could materialise due to an environmental, social or governance event or condition which may impact the fund’s investments and negatively affect the returns of the fund.
Fund operations: The fund is subject to the risk of loss resulting from inadequate or failed internal processes, people or systems or those of third parties such as those responsible for the custody of its assets, especially to the extent that it invests in developing countries.
Charges from capital: Fees and expenses of this share class may be charged to the capital of the share class rather than its income.  This policy will result in an increase in income available for distribution to investors. However, this will forego some of the capital that the share class has available for future investment and potential growth.
Complete information on the risks of investing in the Fund are set out in the Fund’s prospectus.

Important information

This advertisement or publication has not been reviewed by the Monetary Authority of Singapore.

FTGF Clearbridge Global Infrastructure Income Fund is a sub-fund of Franklin Templeton Global Funds plc (“FTGF”), an open-ended umbrella investment company constituted in Ireland.

This webpage is for information only and does not constitute investment advice or a recommendation and was prepared without regard to the specific objectives, financial situation or needs of any particular person who may receive it. This webpage may not be reproduced, distributed or published without prior written permission from Franklin Templeton.

Any research and analysis contained in this webpage has been procured by Franklin Templeton for its own purposes and may be acted upon in that connection and, as such, is provided to you incidentally. Although information has been obtained from sources that Franklin Templeton believes to be reliable, no guarantee can be given as to its accuracy and such information may be incomplete or condensed and may be subject to change at any time without notice. Any views expressed are the views of the fund manager as of the date of this webpage and do not constitute investment advice. The underlying assumptions and these views are subject to change based on market and other conditions and may differ from other portfolio managers or of the firm as a whole.

There is no assurance that any prediction, projection or forecast on the economy, stock market, bond market or the economic trends of the markets will be realised. Franklin Templeton accepts no liability whatsoever for any direct or indirect consequential loss arising from the use of any information, opinion or estimate herein.

The value of investments and the income from them can go down as well as up and you may not get back the full amount that you invested.

Past performance is not necessarily indicative nor a guarantee of future performance of the Fund. Subscriptions may only be made on the basis of the most recent Prospectus and Product Highlights Sheet which is available at Templeton Asset Management Ltd or authorised distributors of the Fund. Potential investors should read the details of the Prospectus and Product Highlights Sheet before deciding to subscribe for or purchase the Fund. This shall not be construed as the making of any offer or invitation to anyone in any jurisdiction in which such offer is not authorised or in which the person making such offer is not qualified to do so or to anyone to whom it is unlawful to make such an offer. In particular, the Fund is not available to U.S. citizens, residents or greencard holders.

The FTGF Clearbridge Global Infrastructure Income Fund may invest in certain types of derivatives for investment and/ or efficient portfolio management purposes.

Investors may wish to seek advice from a financial adviser before making a commitment to invest in shares of the Fund. In the event an investor chooses not to seek advice from a financial adviser, he/she should consider whether the Fund is suitable for him/her.

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