By Annabel Brodie-Smith
These words were written by William Congreve, the English poet and playwright, who lived from 1670 to 1729, but they seem just as appropriate now. Yet again politics has come to the fore as the UK comes to terms with the unexpected news of a hung parliament.
Political uncertainty seems to have become the status quo but it’s comforting that equity markets currently, at least, appear to be taking the news in their stride with the FTSE 100 closing at 7,419 on the 15th June.
Surprisingly, three members of the Bank of England’s Monetary Policy Committee, out of the eight voting, wanted to raise interest rates this month. We'll have to see how this develops, but it continues to look like interest rates will remain low for the foreseeable future so this month we are taking a look at investment companies which generate income by investing in alternative assets, namely infrastructure and property.
Open-ended property funds suffered considerable problems after the referendum, with a number suspending trading, which meant investors could not buy or sell these funds. This situation highlighted the advantages of the closed-ended structure for an illiquid asset like property or infrastructure.
Investment companies are listed companies on the stock exchange so investors can always buy and sell shares freely. Investment company managers do not have to manage inflows and outflows and can take a long-term view of their portfolios, without being constrained by the illiquid nature of the asset class.
Although investment companies’ share prices dipped after the referendum, they continued to trade and swiftly recovered, with the Property Direct - UK sector up 18% over the last year. You can read the views of Will Fulton, manager of the UK Commercial Property Trust, who gives his view on the fallout from the Brexit vote and is positive on the outlook for UK commercial property despite the ongoing political uncertainty.
You can also read about our response to the FCA’s illiquid assets paper including our thoughts on the problems of the open-ended property funds and see a compelling comparison of open-ended and closed-ended property fund returns.
Infrastructure has proved to be a popular sector for income seeking investors over recent years, with a current yield of 4.7%, and the sector has grown rapidly in size. HICL Infrastructure was the first infrastructure investment company to launch in March 2006, raising £250m but has now grown to £2.38bn, the eighth largest investment company. The infrastructure sector has grown from strength to strength and is now the fourth largest investment company sector.
Read our release to find out where managers are finding current opportunities and the outlook for the sector, and find out more about infrastructure by watching our film where I talk to Harry Seekings, Director of InfraRed Capital Partners, Investment Advisers to HICL Infrastructure, and Greg Taylor, Co-Portfolio Manager of Sequoia Economic Infrastructure Income.
See you next month and let’s hope the summer weather continues.
If you'd like to find out more about alternative assets, please view our guide: Something a bit different?