Infrastructure Investment Characteristics

  • High barriers to entry and monopolistic characteristics – capital intensive, large scale assets with high development costs prevent significant competition

  • Steady, predictable cash flow with strong yield – assets are long-lived and backed by long-term contracts or concessions, which support predictable returns to shareholders

  • Inflation protection – regulated price mechanisms or concession increases linked to inflation

  • Low sensitivity to changes in GDP – inelastic demand for essential services tend to be much less sensitive to business cycle fluctuations

Why Listed Infrastructure?

  • Strong diversification potential

  • Immediate investment

  • Highly liquid

  • No need for investor operating expertise

  • Minimum investment threshold

  • High levels of disclosure

  • Lower fee structure compared to private funds or partnerships

  • Low correlation to other asset classes

Silkworth Capital Points of Differentiation

  • Dividends – to be considered for portfolio inclusion, company must have maintained or grown dividends for at least 3 consecutive years

  • Avoid Japanese Utilities – performance is driven by regulatory issues surrounding nuclear restarts post-Fukushima in addition to low or no dividends

  • Minimize Emerging Markets Exposure – outsize contributors to portfolio volatility, while marginal contributors to portfolio yield

Result: Expected lower portfolio volatility and enhanced yield profile relative to competitors