Ecofin Global Utilities and Infrastructure Trust (EGL) is two years old. The period since its launch has been one in which utilities and infrastructure have faced significant headwinds from rising interest rates and investors’ focus on growth stocks. Despite this, it has thrived.
EGL’s manager (Jean-Hugues de Lamaze) has been nimble, moving to take advantage of opportunities provided by swings in sentiment. EGL has borrowed money to buy stocks he has identified as being of good quality and cheap. This strategy has contributed significantly to EGL’s performance. Utility valuations have moved back towards their five-year averages and, in a world that is close to the top of the economic cycle, utilities’ defensive characteristics should find favour if markets fall more decisively. Irrespective of this, Jean-Hugues is confident about reaching the trust’s long-term total return target of 6-12% per annum. He cites the sector’s improving balance-sheet strength, rising power prices and earnings, in many cases faster dividend growth than for broader markets, reasonable valuations and the potential for mergers and acquisitions as reasons investors should be positive.
Developed markets utilities and other economic infrastructure exposure
EGL seeks to provide a high, secure dividend yield and to realise long‐term growth, while taking care to preserve shareholders’ capital. It invests principally in the equity of utility and infrastructure companies which are listed on recognised stock exchanges in Europe, North America and other developed OECD countries. It targets a dividend yield of at least 4% per annum on its net assets, paid quarterly and can use gearing and distributable reserves to achieve this. The portfolio is currently invested entirely in securities that pay a yield.
Ecofin Global Utilities and Infrastructure – Staying nimble : EGL