Douglas 2120 Douglas

with two of the leading players in the industry, Brookfield Asset Management and Macquarie Capital Investment Management. Both have long and successful track records of investing and managing infrastructure assets.

Each of their websites will provide you with a wealth of information on global and regional infrastructure funds. Brookfield, for example, offers two products for investors. The first allows investors to own part of the actual infrastructure assets while the other allows investors to own a fund that, in turn, owns shares of publicly traded infrastructure companies.

While Brookfield and Macquarie manage infrastructure trusts that target an attractive 6 per cent distribution policy, it’s important that — as with any investment strategy — due diligence and care be exercised before making a purchase.

However, these two companies do not have a monopoly on infrastructure plays. There are almost a dozen mutual fund companies that offer infrastructure funds, but they can be somewhat difficult to find. For example, the two leading internet sites that track and monitor the performance of mutual funds and closed-end trusts (Morningstar.ca and GlobeFund.com) don’t have a fund category called “infrastructure.” Instead, they are hidden inside the category of “global equities,” and when you look at their performance, they are ranked against global stock markets. Type "infrastructure" in the name search at either website and a list of funds will appear.

reducing riskFor passive investors who prefer exchange-traded funds (ETFs), iShares, Powershares, BMO and State Street Global Advisors (SSgA) all offer infrastructure products for investors. As always, I recommend that you use a professional advisor before purchasing ETF or mutual fund products. However, infrastructure assets generally provide a steady stream of income and inflation protection, and in today’s low-interest-rate environment, it's easy to see why pension and endowment funds are including them in their asset mix.

Finally, if you are worried about outliving your retirement capital, I recommend taking a long look at how the Canada Pension Plan manages its investment portfolio. The Canada Pension Plan Investment Board increased its exposure to infrastructure investments from 2.2 per cent in 2008 to 6.1 per cent in 2013. By comparison, their exposure to Canadian stocks fell from 23.5 per cent to 8.4 per cent over the same time period. ■

Steve Bokor, CFA, is a licensed portfolio manager with PI Financial Corp, a member of CIPF.

Money by steve bokor

Investment patterns are shifting as baby boomers are either preparing to enter their retirement years — or are already there. In my experience, they are looking for investments that can deliver a reasonable level of income, growth and some form of inflation protection.

Unfortunately, in today’s low-interest rate environment, boomers will find that goal difficult to achieve in the bond and GIC marketplace. Cash as an asset class won’t help either and the dividend yield on broad stock market indexes has also fallen as a result of rising stock prices. Luckily, there is one asset class that has been somewhat overlooked by individual investors: infrastructure assets.

inside infrastructure assetsTypically, infrastructure assets are long-life assets like airports, toll roads, hydro-electric generation facilities, oil and gas pipelines and waste-water treatment plants. Historically, many of these assets were owned by federal, provincial (or state) or municipal agencies because the initial construction and operational costs were better funded by government

than private industry. But thanks in part to deregulation over the past few decades, private industry has demonstrated it has the capital, technical know-how and expertise to finance, build and operate infrastructure assets more efficiently than government.

Globally, governments are running massive deficits and unsustainable debt loads at a time when infrastructure assets need higher levels of maintenance and repair. This is creating a win-win environment for both government and industry. Governments can offload expensive, money-losing operations that corporations can rationalize and return to profitability and then operate as businesses with stable predictable incomes that increase with inflation. Plus, the whole sector is growing. According to a January 2013 report from McKinsey Global Institute, “US $57 trillion in infrastructure investment will be required between now and 2030 — simply to keep up with projected global GDP growth.”

close to idealIf you think about it, as an asset class infrastructure assets are almost the ideal investment. Where else do you find businesses that have large physical assets, a virtual monopoly on the delivery of their essential or near-essential product or service, and a captive customer base that must pay the rate they set.

It’s a business environment that would make most owners go green with envy.

Think FortisBC. According to their website, every day 1.1 million customers in more than 135 communities use the natural gas and electrical energy generated by their hydro-electric plants. I am not saying "buy Fortis" but this company has seen its dividend grow by 28 per cent over the last five years and its stock chart is not too shabby either.

How do you get in?So how do you go about investigating and investing in infrastructure? In my opinion, start

energy sources

property

Recent positive investment performance is fuelling the popularity of infrastructure assets. Douglas explores the appeal of long-life real assets like airports and hydro-electric facilities.

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