Revealed: The best funds to invest in UK infrastructure Revealed: The best funds to invest in UK infrastructure

Stephen West, partner at GCP, which has a number of investment funds, has revealed where he is seeing value in UK infrastructure assets right now.

 Revealed: The best funds to invest in UK infrastructure

West sees profit in UK economy

He commented, ‘In the renewables sector, the best operators are acting as consolidators, as industry and EIS owned facilities, for example, continue to be sold to lock in the developer returns. Despite persistently low bond yields, yields at purchase here are not under pressure. Discount rates being used to generate NAVs remain conservative as they are set by Boards or external consultants and vary in the 7.5 per cent to 8.75 per cent range. Modest leverage is being applied to these portfolios taking advantage of the availability of extremely low, long term fixed rate debt offered by UK pension funds and insurers (in the 3 per cent area), which further enhances returns for investors.’

Read more: The best shares to invest in infrastructure

West continued, ‘The backdrop is similar in the pure infrastructure trusts with increased government focus on infrastructure stimulating asset production and reducing any downward market pressure on rates at which assets are acquired. Across all the closed end investment companies, an additional value aspect stands out. The inflation linkage is already having an effect – for example Bluefield Solar’s NAV increased 5.6 per cent over the six months to 31/12/16 with inflation adding (around) 50 per cent of this.’

He concluded his comments with the remark that, ‘In REITs {Real Estate Property Trusts) similarly, we continue to find compelling value in primary healthcare such as GP surgeries, well run care home portfolios and some student accommodation funds. Yields for these long term lease assets remain well above those achievable for similar risks in the bond markets, given the best managers work hard to put together portfolios of assets (which individually lack scale) and again modest long term leverage provides an excellent boost for investors.’

Comments (0)