Overall, the listed infrastructure sector performed well over the past 12 months, despite a downturn in more recent months. Performance was supported by investors’ search for yield and a general re-rating of the sector back to longer-term historical averages. Managers within the sector continued to perform strongly relative to the benchmark, with all nine Zenith-rated managers outperforming the benchmark. We believe this is a strong reflection of the quality and depth of management within the sector. The higher-quality managers in the sector continued to develop both stock analysis techniques and portfolio construction tools, with a focus on risk management.
Winner: Magellan Asset Management
Zenith says: The Magellan infrastructure team is small but led by highly experienced investors. Comprised of four primary members, it is led by the head of research, Gerald Stack, who is responsible for final security selection and portfolio construction.
Magellan’s multi-stage investment approach incorporates both qualitative and quantitative analysis, focusing on stocks that exhibit strong infrastructure characteristics, such as an inelastic demand curve and predictable cash flows. Magellan constructs a high conviction portfolio of between 20 and 40 positions and applies a unique and detailed risk management philosophy at both the security and portfolio level.
Magellan’s unique and detailed investment research has translated into strong performance over all time periods. The fund is currently ranked in the first quartile versus its peer group over both the three- and five-year time periods and has generated a significant level of outperformance.
Interview:
Listed global equities manager Magellan was a finalist in three award categories, including the prestigious Fund Manager of the Year.
Magellan took out the infrastructure category, with portfolio manager Gerard Stack crediting the group’s “solid, objectives-based” management style for delivering stable returns.
He says Magellan’s well-defined universe of infrastructure stocks is built with a focus on reliable returns. The overall composition of the fund is roughly 50 per cent in regulated utilities and 50 per cent in infrastructure such as toll roads, airports, ports and communication assets.
“Infrastructure should deliver real returns of 5 per cent and nominal returns of 8 per cent across economic cycles, and a well-designed product will deliver that for investors,” Stack says.
“There was no single asset or stock which stood out, but it was the overall mix.”
Since the start of the year, the fund has been gradually moving away from the United States, which Stack says has become “progressively overvalued”. It maintains an overweight position to Europe and Australia.
For the past few years, Magellan Financial Group has been one of the best-performing Australian companies on the Australian Stock Exchange. It has posted record profits off the back of improved market conditions, strong investment performance and growth in assets under management.
– Leng Yeow
Finalists
– Lazard Asset Management
• Employs a consistent and robust investment process with a relatively strong valuation bias.
• Has generated first-quartile performance over all time periods, with particularly strong performance over the 12 months to July 2013.
• Lazard has consistently displayed a high level of conviction in its valuation process, building contrarian positions in out-of-favour regions and sectors.
– RARE Infrastructure
• One of the largest investment teams, with a strong background within the infrastructure sector.
• Employs a rigorous investment process, culminating in a highly detailed research report.
• Has access to a highly experienced investment advisory board, which provides insight into global macroeconomic issues.
