Infrastructure has become a must

Infrastructure is becoming a must in all portfolios. It is a decorative asset. Private companies are helping along with governments to achieve this. Whitehelm Capital’s fund continues to perform strongly and should benefit from major investment programmes in the major developed countries. 

Whitehelm Capital is an Australian-based asset manager established 23 years ago, with a specialised fund for infrastructure projects marketed in Belgium and Luxembourg. Investment Officer recently spoke to Graham Matthews (CEO of the group) to explain the specifics of their approach, and how the Whitehelm Capital Low Carbon Core Infrastructure Fund works. 

Core companies

“On the one hand, unlike many of our competitors, we prefer core companies that operate in regulated projects, with long-term contracts that are protected from inflation, and that generate growing cash flows,” said Graham Matthews, with a 3.5 per cent return at portfolio level. “On the other hand, we prioritise sustainable projects aimed at improving energy efficiency.” 

The Whitehelm Capital Low Carbon Core Infrastructure Fund has a Morningstar rating of four to five stars, depending on the sub-fund, and was recently awarded the Towards Sustainability label by Febelfin, the non-profit organisation representing the Belgian financial sector. “It is the strictest label on the market, requiring much more effort to obtain and maintain, paying particular attention to portfolio composition.” 

The annualised return over the past three years has been more than 10 per cent, with a low correlation to the general indices. The fund has also risen by almost 50 per cent since its launch in May 2016. “Our investment strategy is to invest in some 40 countries, equally weighted in the portfolio,” with very low turnover. The fund is mainly marketed to private banks, family offices and pension funds. 

Outperformance

Moreover, the fund has outperformed its benchmark since the outbreak of the coronavirus pandemic. “We have remained active during this period, although it has generally been more difficult to establish new relationships with clients and companies,” said Graham Matthews. “in a way, the pandemic has exposed the real sustainable sectors in infrastructure, such as decarbonising our economy or treating wastewater.” 

He is therefore particularly excited about the prospects for energy storage in the coming years. “After years of being labelled boring, infrastructure companies are now at the centre of challenges such as sustainable development and the digitalisation of societies. I expect many companies to go public in the coming years, especially hydrogen technologies.” 

Infrastructure plans

In addition to fund management, Whitehelm Capital is also active in the private market through its other investment funds, and can invest directly in certain projects. “There is much more competition for the different projects now than when we started our business. For large projects, auctions are held where prices rise sharply. That’s why we prefer to look at medium-sized projects, where valuations are generally more reasonable.” 

Matthews pointed out that Whitehelm Capital is obviously looking at the various infrastructure plans being rolled out around the world. “We now have an office in the United States, so we can position ourselves in opportunities that will arise from the privatisation of infrastructure, particularly airports that need modernisation or motorways built in the 1960s. Private companies must now come to the aid of the government to accelerate public investment programmes.”