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Quaero Capital changes benchmark of Infrastructure Securities strategy

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The Infrastructure Securities strategy run by Quaero Capital portfolio manager Mark Ebert (pictured), has changed its benchmark.

In March, the portfolio manager re-positioned the Real Assets portfolio to focus exclusively on infrastructure securities, the sector which had always been the driver of the Real Assets portfolio.  The name was changed, and now infrastructure securities comprises 98.5 per cent of the strategy, with the balance in cash.
 
“We intend to maintain this infrastructure focus for the foreseeable future,” Ebert says. “Since infrastructure equity portfolios have a high correlation to inflation, we consider G7 inflation+5 per cent to be a more relevant and appropriate benchmark”. The largest portfolio allocations remain the Toll Road & Tunnel, Diversified Infrastructure, Social Infrastructure, Wireless Communication and Railroad sub-sectors.
 
The strategy provides a liquid alternative to what has traditionally been the domain of private equity. All stock positions can be liquidated in one day. In accordance with the manager’s hedging policy, all major currency exposure is hedged for all classes, meaning some 84 per cent of the portfolio is hedged.
 
Diversification is ensured by investing in a wide range of Infrastructure sub sectors. There are 35 stocks in the portfolio; the largest accounts for 3.7 per cent.
 
Some of the portfolio’s biggest movers in September included Societa Iniziativa Autostradali e Servizi, which rose 7.6 per cent after climbing 8 per cent during August. It is the second largest Italian toll road concessionaire and the fourth largest in the world. It recently announced that five of its subsidiaries have signed additional deeds with the Italian Ministry of Infrastructure and Transport, ending a period of regulatory uncertainty. Macquarie Atlas Roads was down 4.4 per cent after announcing the purchase of a further 4.9 per cent stake in its French toll road business, APRR, which increases its stake to 25.0 per cent. This is an accretive transaction funded by debt and a new equity issue at a 5 per cent discount to the theoretical ex-rights price.
 
John Laing Group was down 4 per cent. It announced H1 results with a 1.2 per cent increase in NAV / share, and a 48 per cent reduction in operating income. The company is expected to benefit from its very pro-active portfolio management. Laing invests in low-risk markets in North America, Europe and Australasia, and we project 12 per cent compound NAV growth over the next three years with the dividend rising 30 per cent over the period.
 
The railroad sector was up 6.5 per cent last month. The strategy is very overweight this sector and all of the six railroad stocks were up.  Kansas City Southern advanced 5 per cent, Canadian Pacific increased 8 per cent, Norfolk Southern rose 10 per cent, and Union Pacific climbed 11 per cent.

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