ECOFIN GLOBAL UTILITIES AND INFRASTRUCTURE TRUST advantages from surging electrical energy costs

For investors in search of portfolio diversification, investment trust Ecofin Global Utilities And Infrastructure is worth a look – especially if you are in search of a regular income without taking needless risks with your capital.

As its name implies, the £250million fund, part of investment house Redwheel, invests in a mix of utility companies (gas, electricity, water and waste management), providers of airport terminals and associated services, and toll roads.

The fund is invested in 43 stocks, from a potential universe of some 640 companies valued at $6 trillion (£4.4 trillion). Holdings are principally listed in the United States, Europe and the UK. The trust avoids unlisted companies, with the overall focus on ensuring the portfolio is diversified across all key infrastructure themes.

Among the portfolio is an array of businesses that UK investors will be familiar with. They include the likes of National Grid (the fund’s biggest holding) and SSE in the UK, German energy giant Eon and French waste management specialist Veolia.

Although the trust has not been immune from the recent volatility in stock markets caused by the continued conflict in the Middle East, it has weathered better than most investment funds. Since the beginning of hostilities at the end of February, it has outperformed both the FTSE World Index and the FTSE All-Share Index.

Fund manager Jean-Hugues de Lamaze says: ‘We invest in equities that, as a result of their defensiveness, are on average 30 per cent less volatile than the wider stock market. Many holdings will also benefit from the higher electricity prices that the conflict will bring about.’

Since the conflict began, the manager has taken a slice of profits from some of the best-performing holdings in recent months while also reducing positions in companies most exposed to the fallout from the war.

He declined to name the businesses, although he did say that recent portfolio additions include Greek-listed Athens Water Supply and US gas infrastructure giant Williams Companies. The trust’s longer term performance numbers are also impressive.

Over the past one and five years, it has delivered respective returns of 46.3 and 77.8 per cent.

Equivalent numbers for the FTSE World and All-Share indices are 39.7 and 81 per cent and 30.2 and 71 per cent. Since launch in September 2016, the trust’s share price has grown by an average 13.7 per cent a year.

Looking forward, Lamaze says strong demand for electricity over the next decade, caused by the move away from fossil fuels and the massive energy needs of data centres required for artificial intelligence, will provide a positive backdrop for the trust.

The fund, listed in the UK, pays quarterly dividends and intends to pay 9p of income a share in the financial year to the end of September. This compares to 8.5p in the previous year, with annual dividend growth over the past five years averaging 5 per cent.

‘The trust’s board is keen to keep the dividend growing,’ says Lamaze. The shares currently trade at around £2.80. The trust’s market ticker is EGL and its identification code BD3V464. Annual charges total 1.29 per cent and Lamaze runs the portfolio from Redwheel’s London offices, also home to UK trust Temple Bar.

Two of the trust’s seven-strong investment team are based in Miami to keep an eye on the US holdings and look out for new investment opportunities.

Other global infrastructure funds (not stock market listed like Ecofin) include those run by First Sentier, Gravis and M&G.