company makes a bet on infrastructure
David Hoffman, Investment News
PHILADELPHIA — A mutual fund company is
taking a chance on the burgeoning market of
Kensington Investment Group Inc. of
Orinda, Calif., expects to launch the
Kensington Global Infrastructure Fund on
It will be the first open-ended mutual
fund to give investors access to
infrastructure assets once government
financed and operated but now leased and
operated by private entities.
It won’t be the last such fund, according
to industry experts.
Infrastructure investments represent a
great opportunity for investors, said Joel
Beam, a portfolio manager with Kensington.
During the past 15 years, more than 100
countries have experienced privatization of
state-owned enterprises, generating an
estimated $735 billion, Mr. Beam said.
And the “privatization wave” is just
catching on in the United States, he said.
The Chicago Skyway Toll Road and Dulles
Greenway in Northern Virginia recently were
privatized. And states such as New Jersey
and Pennsylvania are debating whether to
privatize their toll roads.
Financial advisers, however, said
investors should be cautious.
“It’s an interesting idea,” James Kibler,
president of Eldridge Financial Planning LLC
in New York, said about a fund that invests
in infrastructure assets. “But it sounds
like an area where there is potential for
political or regulatory risk.”
It’s a “fascinating” concept, said Armond
Dinverno, an adviser and co-president of
Balasa Dinverno & Foltz LLC in Itasca, Ill.
But “it’s early on in the life cycle” of
the infrastructure investment market to
really tell how such investments will
perform, he said.
Such concerns, however, are overblown,
Mr. Beam suggested.
It wouldn’t be in the best interests of
governments to “upset the apple cart,”
because privatization gives governments the
means to finance the building and
maintenance of their infrastructure, he
And although Kensington may be the first
to bring out a mutual fund that invests in
infrastructure investments, infrastructure
long has attracted international
private-equity investors and pension plan
sponsors, who are drawn to the asset class
for its competitive returns, moderate
volatility, low correlation to other asset
classes and growth potential, Mr. Beam said.
There is no doubt that infrastructure
investments are attractive to institutional
investors, said Jeff Tjornehoj, a
Denver-based senior research analyst with
Lipper Inc. of New York.
As a result, investors can expect to see
other mutual fund companies follow
Kensington in the development of funds that
invest in infrastructure investments, he
But Mr. Tjornehoj doubts that such funds
will ever become hugely popular. “Investors
— they have a lot of non-correlated choices
already,” he said. “Where would this fit?”
Investors have yet to really warm to the
SDPR FTSE/Macquarie Global Infrastructure
100 (GII) exchange traded fund, which was
launched by State Street Global Advisors of
Boston on Jan. 31. The fund — designed to
track the Macquarie Global Infrastructure
100 Index — has just $28 million in assets.
And two closed-end funds introduced more
than a year ago by Macquarie Infrastructure
Management (USA) Inc., a New York-based unit
of Macquarie Bank Ltd. of Sydney, Australia
— the $694 million Macquarie Global
Infrastructure Total Return Fund Inc. (MGU)
and the $244 million Macquarie First Trust
Global Infrastructure Utilities Dividend and
Income Fund (MFD) — also have failed to
generate much interest.
Both closed-end funds were trading at
discounts to their net asset value. That may
be true, but since Kensington announced the
pending launch of its global infrastructure
fund last week, a lot of investors have
expressed their interest in the fund, Mr.
He added that the Kensington Global
Infrastructure Fund is different from the
ETF in that it will be an actively managed
And mutual funds generally are more
attractive to retail investors than
closed-end funds, because investors don’t
like having to deal with discounts and
premiums, Mr. Beam said.