And those are just the averages. One of the best performers in the 19-fund
infrastructure category, the
Dynamic Global Infrastructure Fund, generated a 10-year average annual compounded rate of return of 11.3%
through the end of January, including 4.1% for the most recent year. Those
figures place it among the top decile of all funds in terms of performance
over those time frames.
“We invest only in developed markets, and only in actual infrastructure
[owners and operators],” Latshaw adds. “Many would include engineering and
construction companies in the definition of ‘infrastructure’, but we don’t
Latshaw goes on the explain the fund’s four-step selection process: “Our
universe is the S&P Global Infrastructure Index and the Dow Jones
Brookfield Index, but then we apply a quality filter. Some companies in
those indices don’t meet our standards, and it can get nuanced – for
example, airport operators may be replaced from time to time, but we want
companies that can’t be replaced. So, our investable universe is fairly
“The next thing we look at is the regulatory environment – it has to be
supportive of a monopolistic industry structure,” Latshaw says. “Regulators
that are firm but fair are the best for creating long-term value. They make
you work, but then everybody wins: investors; the public; and regulators.
“Thirdly, we look for long-term growth prospects,” says Latshaw.
“Infrastructure is often seen as a boring, conservative bond-proxyish
investment, one that only produces cash flow, but we also look for growth
potential. In fact, if we look at the fund’s track record, we’ve earned a
lot more money from growth than from yields.
“Finally, we look for discipline, and it’s not just management teams
working well with consumers and regulators,” Latshaw says. “For example, an
electricity supplier must replace towers and maintain the system, but they
need to do it sensibly over the long term, not push the balance sheet
faster than it wants to go. That takes discipline.”
In addition, Latshaw notes that companies under consideration must have a
dividend yield that grows over time, and they have to be priced at a
discount. And once bought, companies tend to stay in the portfolio a long
time. The fund’s current turnover is around 20%, but Latshaw notes that it
has been as low as 7%!
As an example of companies with all the desired virtues, Latshaw cites Juno
Beach, FL-based NextEra Energy Inc., the largest
rate-regulated electric utility in the United States (as measured by retail
electricity produced and sold) and, through its affiliates, the world’s
largest generator of renewable energy from the wind and sun, as well as
being a world leader in battery storage.
“It’s best in class and has a strong balance sheet,” says Latshaw. “It’s
regulated, so there is no competition, no economic uncertainty, and there’s
lots of long-term growth potential from its Florida operations as well as
from the renewable energy side. And every single day, management comes up
with ways to further cut costs; their discipline is impeccable.”
is an experienced financial and business journalist and a frequent
contributor to the Fund Library.
Notes and Disclaimers
© 2019 by Fund Library. All rights reserved. Reproduction in whole or in
part by any means without written permission is prohibited.
Commissions, trailing commissions, management fees and expenses all may be
associated with mutual fund investments. Please read the simplified
prospectus before investing. Mutual funds are not guaranteed and are not
covered by the Canada Deposit Insurance Corporation or by any other
government deposit insurer. There can be no assurances that the fund will
be able to maintain its net asset value per security at a constant amount
or that the full amount of your investment in the fund will be returned to
you. Fund values change frequently and past performance may not be
repeated. No guarantee of performance is made or implied. The foregoing is
for general information purposes only. This information is not intended to
provide specific personalized advice including, without limitation,
investment, financial, legal, accounting or tax advice.