Ecofin Global Utilities and Infrastructure – On the contrary …. – Ecofin Global Utilities and Infrastructure (EGL) had a strong 2017, beating the MSCI World Utilities Index by a significant margin. Utilities and infrastructure have got off to a difficult start in 2018 however, suffering from negative sentiment as markets have focused on the heightened prospect of interest rate rises as well as a couple of other high-profile difficulties within the sector.

EGL’s manager, Jean-Hugues de Lamaze, says that, while defensives (stocks that have stable earnings and dividends that are less sensitive to the broader economic cycle) are out of favour and sentiment has changed, the outlook for earnings, cash flow and dividend growth has not, and in fact remains very strong. With valuations depressed, he sees this as a classic contrarian opportunity (contrarian strategies are those that purchase and sell investments that are in contrast to the prevailing market sentiment at the time to take advantage of mispricings) and has increased borrowing to purchase stocks he likes while they are cheap. This strategy served EGL well in the aftermath of President Trump’s election. Jean-Hugues expects that it will drive outperformance once again.

Developed markets utilities and other economic infrastructure exposure

EGL seeks to provide a high, secure dividend yield and to realise long‐term growth, while taking care to preserve shareholders’ capital. It invests principally in the equity of utility and infrastructure companies which are listed on recognised stock exchanges in Europe, North America and other developed OECD countries. It targets a dividend yield of at least 4% per annum on its net assets, paid quarterly, and can use gearing and distributable reserves to achieve this. The portfolio is invested entirely in securities that pay a yield.

EGL : Ecofin Global Utilities and Infrastructure – On the contrary….