Mutual-fund spotlight | Infrastructure is projected to build up funds
U.S. Global Investors and Kensington Investment Group opened the first U.S. mutual funds focused on companies expected to profit from $30 trillion of projected infrastructure spending in the next two decades.
The funds mirror private pools set up by Goldman Sachs Group, Old Lane and Macquarie Bank, which raised a combined $17 billion last year. They will invest in companies involved in building and operating infrastructure such as roads, power plants and water systems.
The U.S. Global MegaTrends Fund, overseen from San Antonio, Texas, returned 3.7 percent through Nov. 7 since opening on Oct. 1.
Kensington’s Global Infrastructure Fund, run from Orinda, Calif., rose 12 percent through Nov. 7 since it began trading at the end of June. The Standard & Poor’s Global Infrastructure Index has climbed 23 percent this year, four times that of the broader S&P 500 Index of U.S. stocks.
Countries are “pouring a great deal of money into infrastructure and will continue to do so, so there is a case to be made for companies that will be beneficiaries of this boom,” said Michael Herbst, an analyst at research firm Morningstar in Chicago. “I would expect to see more such funds open.”
The funds hold a mix of developed- and emerging-economy companies including Switzerland’s ABB, the world’s largest builder of electricity networks, and Hong Kong-based port owner China Merchants Holdings (International). ABB soared 76 percent in dollar terms this year through Nov. 7, and China Merchants jumped 71 percent.
The U.S. Global Investors and Kensington funds have a combined $78 million in assets. State Street in Boston has offered an infrastructure exchange-traded fund since January.
Managers of diversified funds also are piling into infrastructure investments. BlackRock’s Thomas Burke put almost a third of the $890 million BlackRock Global Growth Fund into infrastructure-related assets.
Fidelity Investments’ William Kennedy has a quarter of the $14.7 billion International Discovery Fund in industries that benefit from infrastructure spending such as industrial materials and utilities.
“We think infrastructure companies have a very attractive growth profile, and it’s one that crosses geographies and includes many industries,” BlackRock’s Burke said from his New York office.
U.S. Global Investors changed the strategy of an existing fund, the U.S. Global Accolade MegaTrends Fund, to focus solely on infrastructure stocks. The managers of the revamped MegaTrends fund - Frank Holmes, John Derrick, Jack Dzierwa and Romeo Dator - had 90 percent of the fund in U.S. stocks as of Sept. 30, the date of its most recent regulatory filing.
The Morgan Stanley Capital International Emerging Markets Index has climbed 41 percent this year through Nov. 7, compared with 4 percent for the S&P 500.
Countries around the world will lay out an estimated $30 trillion through 2032, the Macquarie report said.
Much of that will come from emerging economies, though disasters such as Minnesota’s bridge collapse in August show that $1.6 trillion needs to be spent on updating U.S. public projects, said Dzierwa, citing the American Society of Civil Engineers.