December 2020
M&G I NVESTM E NTS
MEET THE
MANAGER IFA Magazine talks to Alex Araujo, fund manager, M&G Global Listed Infrastructure Fund, to find out how he is positioning the fund during these Covid times and where he sees the biggest threats and opportunities to performance for 2021 and beyond.
IFAM: HOW HAS THE PORTFOLIO BEEN AFFECTED BY THE COVID-19 PANDEMIC DURING 2020? A A: As you’d expect, there are winners and losers across the three categories of infrastructure in which we invest. The major impact of the lockdown was in ‘economic’ infrastructure, where the use of transportation infrastructure effectively came to a halt. There was a knee-jerk reaction in the market which we used to our advantage with our long-term investment horizon. Energy infrastructure was another area under pressure. The OPEC supply shock added to a challenging backdrop created by a collapse in demand for hydrocarbons. Utility businesses, by contrast, were highly reliable and consistent throughout the difficult period. When it comes to winners, we’re looking for businesses which can continue to generate increasing earnings, cash flow and dividends. The utilities sector is the only sector where earnings are still growing. That said, the market is forward looking and the huge fiscal stimulus packages announced by governments around the world led to a swift reappraisal of how some areas of listed infrastructure were perceived. We started to see a significant rebound in transportation infrastructure including airports
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in anticipation of people starting to fly again. Energy infrastructure also experienced a similar rebound. However, as the second wave has started to hit, it leaves us with an open question as to when we might return to a more normal environment and more specific ones such as what the future holds for the likes of airports etc. as they remain structurally challenged for the short and medium term. ‘Social’ infrastructure was very stable and consistent through the lockdown, similar to the utilities sector, so I would expect this category to underperform as and when the Covid environment eventually loosens again, although the need for hospital infrastructure is very clear. There are structural growth opportunities in this segment and we maintain our exposure, albeit at the lower end of our typical allocation range. In ‘evolving’ infrastructure, there has been a lot of excitement about communications infrastructure during lockdown given the obvious need for digital infrastructure, whether it’s mobile infrastructure, broadband or data centres, but this is not just about lockdown. This is a structural growth opportunity and we are absolutely bullish on this. Transactional infrastructure took a bit of a step back during lockdown just on the payments infrastructure
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