Infrastructure securities winner, the Lazard Global Listed Infrastructure Fund, points to its rigid requirements for its “preferred infrastructure” universe as key to its success.
Lazard only invests in assets that show a higher degree of revenue, certainty and more predictable profit and distributions with lower volatility.
Less than 100 companies globally fulfil that criteria, and then within that, the stock pickers focus on the 25 assets with the most attractive potential returns.
“Our strict adherence to [preferred infrastructure] and our discipline to focus on value are the factors that have driven the long-term returns that we’ve generated,” said Lazard portfolio manager, Warryn Robertson.
Indeed, the Lonsec judges cited the fund’s “benchmark unaware approach” as part of why it was amongst the top performing infrastructure funds across all periods to 2017’s end.
Robertson said that concentrating on generating longterm returns rather than “getting distracted by short-term noise” was core to the fund’s success.
“You have to be patient. The way that we believe you make money in infrastructure investing is to have a longer-term view than the next three months. It’s about how can I make money for clients over three to five-years.”
Underperformance doesn’t automatically mean a stock should be excluded from the investible universe, provided its investment thesis is still intact, according to Robertson.
Italian toll roads are proof of this; while they were underperformers for a number of years, Lazard held onto them as Robertson, and they have recently been the fund’s best performers.
Alongside European toll roads, the fund is focusing on Suropean airports, North American railroads, and increasingly UK regulated utilities at the moment.
Redpoint chief investment officer, Eric Smith, said that staying true to three core strategy elements helped the manager’s Global Infrastructure Fund, a finalist, perform strongly.
These elements were capturing the characteristics of infrastructure that distinguish the asset class from global equities; ensuring sectoral, geographic and stock-level diversification; and focusing on stocks that emphasise quality and value.
Ofer Karliner, a portfolio manager for finalist Magellan’s Infrastructure Fund’s, said that a combination of both a team of “fantastic people” and process were the defining reasons behind the fund’s success.
Their investment process is conservative in how it defines infrastructure, taking a narrower approach, and in stock-picking choices.