I'm not really into sector investing - this is more along the lines of a global theme. But when I have looked at sectors (or themes), I find there's a lot more too them then simply picking an area of the market and buying it blindly.
Here's a pretty good
16 page (pdf) presentation from DWS on the sector/theme - obviously from the perspective of their fund, DWS RREEF Global Infrastructure (TOLLX - NTF at some brokers). It goes into the breadth of the category, from "pure plays" (transportation, communication, energy transmission/distribution, and water) to what I'd call "halo effect" companies such as construction equipment. Talks about various indexes (S&P's being very broad, DJ-Brookfield being more of a pure play). Plus lots of numbers and bar charts.
What I'm seeing from looking at funds is that there seem to be two approaches - value oriented, focusing on transportation (airports, rail, etc.) and growth oriented, focusing more on energy/utility companies (e.g. TransCanada [Keystone], Sempra Energy SRE).
I'm interested in people's thoughts. Here are mine:
- I'm more interested in pure plays than in a broader (and IMHO diluted) approach; if I'm going to invest in a theme, let's keep it focused
- I'm happier concentrating on the industrials (transportation, etc.) sector as opposed to the energy and utility sectors (which I think may be harder to find pure plays for as companies can be involved in the generation/exploration of energy sources; also may be more volatile); but I'll accept a balanced approach
- The funds tend to be pretty concentrated
Specific funds I've been looking at:
- iShares S&P Global Infrastructure (IGF) - broader based index, not too impressive performance
-
BMO Global Infrastructure Index ETF (Toronto: ZGI) - based on pure play DJ-Brookfield index; impressive performance even allowing for 3-4% annual fluctuation in currency exchange rates
- Lazard Global Listed Infrastructure (GLIFX) - this cheaper institutional class avail (TF) at Fidelity in IRAs; pure play value-oriented (from a good value shop)
- Brookfield Global Listed Infrastructure A (BGLAX) - NTF at Fidelity; from the index-creator firm (the firm focuses on infrastructure); this fund is more growth-oriented than their index
- Northern Multi-Manager Global Listed Infrastructure (NMFIX) - NTF, ER < 1%, management combines Lazard and Brookfield; portfolio is mostly a combination of those two; most notable exception is Brookfield has 5% in Kinder Morgan (KMI) but it is missing from the Northern portfolio. Performance does not appear to measure up to the "best of the parent funds"
Most of these funds are classified as global. The Lazard fund is foreign small/mid blend.
Comments
I also love Kinder Morgan (KMP, KMR, KMI). One Canadian play that is not often discussed is Enbridge Income Fund (EBGUF.PK), an assortment of energy infrastructure and storage assets. The pro is that the Enbridge listing does not result in a K-1 tax form and it offers monthly dividends. The con is that there is foreign withholding. Another that I think is interesting is APA Group (APAJF.PK), an Australian company that is the largest owner of energy infrastructure
I've thought about adding Transcanada, especially if the Keystone pipeline was definitely not approved and the stock went down significantly.
Interesting to see the portfolio differences between Brookfield Global Infra CEF (INF) and the mutual fund, despite the same manager. The monthly divs are a nice aspect of INF.
There's a number of PPP (Public Private Partnership) infrastructure funds on the London market. I'm not sure if there are versions of them on the pink sheets. BIP does have investments in a few PPPs.
I had taken a brief look at INF (Brookfield's CEF), but not BIP. It looks like an interesting operation (and as you said, a pure play, looking at the description of their business in their annual statement). I'll have to take a closer look.
Normally, an investment K-1 would spook me a bit. (I've been members of different LLCs, so I've dealt with "employment" K-1's, but they're much simpler.) But Brookfield writes that it does not currently generate UBTI, so BIP would appear safe to keep in an IRA. In a taxable account, I've dealt with a variety of somewhat esoteric tax forms, but I really don't want to get into forms for foreign investment (e.g. 8621). So I'll pass on this as a taxable investment.
Interesting to see that INF (the Brookfield CEF) just cut its holding of Kinder Morgan in half (still a hefty 5% of its portfolio). Will have to figure that one out.
Astute observation about watching Transcanada for an overreaction if Keystone is not approved. Might be a nice short term play (or entry point for a long term buy).
A lot more in your note to check in detail. As you may have inferred, I'm generally much more of a straight mutual fund person. Even so, the pointers help me understand what's going on underneath. (And also give me more comfort about Brookfield, regardless of the structure - OEF, CEF, MLP - that I might use for investing in them.)
In the specality sleeve in the growth area of my portfolio I use TOLLX as my diverisfied infrastructure position. I think, infrastructure is a good theme to invest in. I have also been looking at ALERX which holds mostly MLP's which would be an infrastructure play in firms that move commodity energy type product through pipelines.
Again, I think a infrastructure position makes a lot of sense in a well diverisfied portfolio.
I wish all ... "Good Investing."
Skeeter
In terms of Transcanada, you get these little things (a carbon emissions speech the other day) that don't really say yes or no and the stock kinda waivers and then comes back. I am looking for a no and a larger move. In Canada I also like the Enbridge Income Fund, although the irritation with that is that it does not allow dividend reinvestment, at least with the US pink sheet version.
The other, somewhat similar company to BIP is Cheung Kong Infrastructure (CKISF.PK), which is a subsidiary of the massive Cheung Kong Holdings/Hutchison Whampoa conglomerates. This is a Hong Kong listing, so no K-1, but a milder yield around 3%. This is another opportunistic infrastructure entity, although it's less diversified.
Not sure why INF may have lessened its Kinder Morgan holding, but for me, Kinder remains a very long-term holding. I've pondered PAA as well and may add that in the next few years if a space opens up in my MLP holdings.
As for funds, TOLLX remains a solid option. I like INF (the monthly dividend is also a plus and it continues to trade at around a 5% discount) and the Lazard fund looks interesting, although it is certainly a different portfolio than most in the category.
2) These infrastructure funds appear to be a curious beast in that it's kinda hard to define what types of companies they invest in. Price, in particular, seems to define theirs (TRGFX) very broadly. As I recall: utilities, transportation, transportation facilities, real estate, communications, wireless carriers, energy, raw materials and (including but not limited to) companies that build and service all of the above. Heck, by that definition, banks (or other financial institutions) heavily engaged in financing these endeavors might be included. So could a commercial broadcast network. Just have to wonder what goal - other than to draw in new investors and revenue - fund giants like Price would have in creating one of these. Not meant to disparage the funds or possible opportunities they offer. Just seems like there's other - probably less expensive - ways to have this type of exposure.
As I've commented (often, I think), I'm not one who generally goes for individual stocks (or even individual REITs in real estate, etc.). Nevertheless, the details at that level help me (and I hope others) better understand this portion of the market. One of the things I noticed the other day (which would not have otherwise caught my eye) is that Enbridge is facing obstacles in British Columbia on its Northern Gateway pipeline not dissimilar to the Keystone issues. (Caught this on Bloomberg TV a couple of days ago, but the politics dates back at least a month:
http://www.edmontonjournal.com/news/Environmentalists+cheer+government+rejects+Enbridge+Northern/8462955/story.html.)
With respect to what constitutes the sector - I agree that it is something of a hodgepodge - a mix of utilities (transmission/distribution of electricity and water), energy (transmission of fuel - curious that electricity isn't "energy"), and industrials (notably transportation, but in a broader sense, raw materials, machinery, etc.). This is why I wrote about "pure plays", keeping focused on the core "issues".
FWIW, I'm inclined to go with either an index ETF (I've mentioned a couple), or something like the Northern fund (NMFIX). This is because I tend to avoid very concentrated funds, and because the other "pure play" funds are focused even more narrowly. On the other hand, and as Hank mentioned, funds like TRP tend to dilute the "brand" of the sector.
Tossing a bone to all the M* haters out there
This is one area in which one needs to manually look at all the funds - what sectors they cut across (and whether that shifts over time or they are really narrowly focused). One cannot look at how they compare with their "peers" (usually world stock funds), because those funds aren't really peers. World stock funds invest more broadly, so they'll do much better in some years, and much worse in others. Not an apples to apples comparison.
So part of the exercise for me has been deciding on whether I want a fund that focuses even more narrowly (I don't), and then looking at how the pure play but broader funds perform given that I'm manually selecting a particular portion of the market - which should be smoother and perhaps somewhat lower performing (at least over the short term, say three years) than the more narrowly focused funds. That's okay, if the management is good and worth the risk. So the discussions of Brookfield have really helped in that regard (I was already at least acquainted with Lazard and of course S&P as an index owner).
Oil by rail has taken off, but it's not without considerable issues either (http://online.wsj.com/article/SB10001424127887324263404578612151990815338.html) and I question a little how much this story has already gone; giant rail leasing company GATX missed yesterday and is down quite a bit in the last couple of months. American Railcar is also down quite a bit recently, too. Bill Ackman recently stated that he was going to start selling his stake in Canadian Pacific Rail.
I don't own it , but I like Canadian-listed Enbridge Income Fund (EBGUF.pk in the US) better than the other Enbridge offerings, Kinder and I'd look at Transcanada if the Keystone pipeline was actually just not approved rather than the whole "will it or won't it?" discussion that has gone on and on.
I also really like communications infrastructure and related; I think that will likely be a bigger aspect of infrastructure investment options in the next 5-10 years.
The Northern fund has not lead the category, but it's an interesting combination of managements for a broader look at infrastructure that might fare well/more consistently/etc over time. I don't know about etfs, but I do like cef INF and its monthly divs.