A few days before President Obama announced the awarding of $8 billion in grants to build high-speed railways in 31 states, Delaware Funds launched a new global infrastructure fund that stands to benefit from that government program—at least in the short-term.
The Delaware Macquarie Global Infrastructure Fund, introduced Tuesday, will invest in projects that own or operate hard assets, such as railroads, toll roads and pipelines, says Andrew Maple-Brown, the fund’s manager.
This is a narrower definition of “infrastructure fund” than some other companies use, Maple-Brown says, but there is still a potential universe of some 700 stocks to choose from, with a combined market capitalization of about $3 trillion.
The fund is designed to offer clients a way to generate income while protecting their portfolios against inflation. Infrastructure investments are attractive to many investors because they are part of essential services and offer predictable cash flows.
All of the government stimulus money sloshing around the system, much of which of being used for infrastructure projects should benefit the fund quickly, Maple- Brown says.
But, the longer-term draw for the fund is simply the massive need for maintaining and building infrastructure around the world. Most of the fund’s attention will be in the developed world, but it is able to put up to 30% of its assets into emerging markets as it sees fit.
This fund will be especially attractive to retirees or people preparing for retirement, says Jeffrey Klepacki, head of third-party distribution at Delaware. He also notes that many of the issuers have latitude to adjust their operations with inflation, such as a toll road that increases fares.
Sam Stovall, a strategist at Standard & Poor’s, warns that infrastructure funds can add to the administration needs of a portfolio. “How many balls do you want in the air, how much do you want to manage,” he says. An investor may be able to reap the same benefits from a fund that focuses on industrials and materials, without adding a new administrative headache, Stovall says.
Richard Stus, an infrastructure investing analyst at London-based Preqin, says that such investments have traditionally been used more often by institutional investors like pension funds, which need a long-term outlook to offset their long-term liabilities. “The listed deals are not very popular with institutional investors,” Stus says.
There has been a general push in the market to offer these types of investments to individual investors on the theory that they too want predictable cash flows and a protection from inflation, says Molly Thompson, product manager and vice president of Delaware Investments.
In fact, she says, since the fund will be buying only listed securities—and consequently not facing the one big drawback of illiquidity—Delaware will apply the same type of strategy it would for an institutional fund, such as fundamental, bottom-up analysis, Thompson says.
Delaware Funds are part of the Macquarie Funds Group.
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Here are some other new products:
ETF Securities launched two physically-backed precious metals funds, which are designed to reflect the price changes in the metal itself. They are ETFS Physical Platinum Shares and ETFS Physical Palladium Shares.
Five international sector funds were introduced by iShares, a unit of BlackRock Inc. [BLK], including iShares MSCI ACWI ex US Financials Sector Index Fund, which excludes the United States but lists its top five nations as the United Kingdom, Australia, Canada, Japan and Spain. The other funds are: iShares MSCI Emerging Markets Financials Sector Index Fund; iShares MSCI Europe Financials Sector Index Fund; iShares MSCI Far East Financials Sector Index Fund; and iShares MSCI Emerging Markets Materials Sector Index Fund, with the top five countries being Brazil, South Africa, South Korea, Taiwan and China.
John Hancock, a unit of Manulife Financial [MFC], expanded its variable annuity line with the Venture 4 variable annuity, offering access to John Hancock’s JHT Lifestyle portfolios.
ProShares launched two new leveraged U.S. Treasury ETFs. The ProShares Ultra 20+ Year Treasury will provide twice the daily performance of the Barclays Capital 20+ Year U.S. Treasury Index. The ProShares Ultra 7-10 Year Treasury will double-long the Barclays Capital 7-10 Year U.S. Treasury Index.
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