James Carthew for Portfolio Adviser, 13 September 2024:
The analyst’s view
In a reversal of the pattern of the past couple of years, a trend towards lower interest rates should help rebuild confidence in the infrastructure sector. It came as a great surprise to many investors when listed infrastructure trusts started to trade on discounts to NAV rather than the premium ratings they had been used to.
It may have also caught some managers on the hop, as they had been accustomed to running up debts by buying assets with (then cheap) floating-rate debt and paying that back with the proceeds of new share issuance. Unfortunately, the rise in rates coincided with a buyers’ strike by wealth managers and others on the back of misleading cost disclosure rules. That has created some real bargains.
One of the cheapest is Pantheon Infrastructure. The trust’s portfolio has a fairly strong bias to digital infrastructure. As such, it is a beneficiary of a boom in data centre construction, but it is also helping to fund the rollout of high-speed fibre and supporting the growth in mobile data. The portfolio also has exposure to renewables and energy efficiency projects, district heating and cooling, and a stake in the UK’s national gas grid.
Pantheon Infrastructure can be bought on a 29% discount to NAV, which is unjustified by its track record. During a 12-month period it has delivered the highest total return on net assets (over 13.2%) of any Londonlisted infrastructure trust, ahead even of the mighty 3i Infrastructure (up 11.6%).
Read more here