A Favorite Fund for Global Infrastructure

05/29/2020 5:00 am EST

Focus: FUNDS

Robert Carlson

Editor, Retirement Watch

Select global infrastructure companies are another sector I believe will be good to own through the pandemic and its aftermath, explains Bob Carlson, editor of Retirement Watch — and a participating speaker at MoneyShow's Virtual Event on June 10-12.

Some infrastructure sectors have been seriously hurt by the pandemic, such as transportation-related sectors (airports, toll roads and railroads) and energy-related infrastructure. Other infrastructure companies are holding up or even doing well.

Cell tower and data storage firms enjoy increased demand due to the shelter-at-home restrictions. Many utilities generally have stable demand and cash flow. Some utilities benefit in the short-term from the collapse in energy prices.

This is an investment sector in which I prefer an actively managed fund such as Cohen & Steers Infrastructure (UTF). This is a closed-end fund that uses a leverage ratio of about 30%. The leverage increases the fund’s yield and also makes the fund’s net asset value more volatile than a non-leveraged fund.

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The fund’s management aggressively reduced its exposure to the hardest-hit infrastructure sectors and increased exposure to businesses with more reliable cash flow and that are more recession-resistant.

In addition, the managers are increasing holdings of companies with larger capitalizations and strong balance sheets. The fund is selectively adding positions in battered energy services, such as storage tank and pipeline firms.

Top sectors in the fund recently were electric utilities, cell tower companies and energy services. Those three sectors are more than half the fund. Preferred stocks and bonds make up about 16% of the fund.

Top holdings in the fund were NextEra Energy (NEE), Crown Castle Internationa (CCI), American Tower (AMT), Duke Energy (DUK) and TC Energy (TRP).

In the last four weeks, the fund’s share price increased 11.11%. But it is down 16.96% for the year to date and 6.94% for the last 12 months.

The distribution yield recently was 8.79%. The discount to net asset value fluctuated considerably the last few months. It recently had a 3.42% discount, which compares to a 5.86% six-month average discount.

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