M&G Global Listed Infrastructure
M&G Global Listed Infrastructure looks for a balance of growth and income from three key areas of the sector: economic, social and ‘evolving’ infrastructure. This means investments can include anything from utilities and toll roads to health, education and civil buildings, as well as mobile towers, data centres, payment companies and royalties. It has been run since launch by Alex Araujo.
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Alex Araujo joined M&G’s equity income team in July 2015 and became co-deputy manager of the M&G Global Dividend strategy in April 2016. He has managed the M&G Global Listed Infrastructure strategy since its launch in October 2017 and took on the M&G Global Themes strategy in January 2019. With 25 years of experience in financial markets, Alex has previously worked at UBS and BMO Financial Group. He holds an MA in Economics from the University of Toronto and is a CFA charterholder.
Alex Araujo joined M&G’s equity income team in July 2015 and became co-deputy manager of the M&G Global Dividend strategy in April 2016. He has managed the M&G Global Listed Infrastructure strategy since its launch in October 2017 and took on the M&G Global Themes strategy in January 2019. With 25 years of experience in financial markets, Alex has previously worked at UBS and BMO Financial Group. He holds an MA in Economics from the University of Toronto and is a CFA charterholder.
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Company Description
Founded in 1931, M&G Investments employs more than 2,000 people worldwide, including 350 investment specialists. The company was formerly owned by Prudential plc, but de-merged in 2019 to become listed on the London Stock Exchange. It focuses primarily on fixed interest and equities, but also invests in multi-asset and real estate. Many of its fund managers have been with the company for more than 20 years. Managers are given freedom to implement their own style on funds.
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Investment process
Alex looks at three areas of infrastructure for this fund: economic infrastructure, such as utilities and energy companies, plus transport-linked areas including toll roads and airports; social infrastructure in areas like health, education and civil (federal and municipal building); and evolving infrastructure such as communications (mobile towers and data centres) and transactions, like payment companies and royalties.
Alex looks for companies with critical physical infrastructure, long-term concessions or perpetual royalties. They will also need to be paying some level of dividend and have a market cap of over $1bn. Alex excludes coal and nuclear power companies at this stage.
As part of the research process Alex will want to know about the dividend situation – its history and outlook - the capital discipline of the firm, and the firm’s sustainability credentials. The latter part of the research is led by ESG analysis and overlayed with the UN Sustainable Development Goals. Much of this part of the process will involve fundamental analysis of the firm’s financial statements, as well as meetings with company management teams.
Alex will also look at valuations as he will only own those companies he likes, at the right price. This valuation will be based on the current share price and how it reflects the company’s characteristics and the dividend growth prospects. He will also consider the diversification any new company offers to the dividend profile of the fund, and a company’s sensitivity to the macro environment also feeds into stock selection and position sizing.
Of the three main areas, economic infrastructure will make up around 65-75% of the portfolio, social infrastructure 10-20% and evolving infrastructure 15-25%. These ranges will vary depending on the opportunities available, the valuations they are at and the risk they possess.
Risk
Alex has final say on investment decisions but has M&G’s equity risk team to provide the information. In the stock analysis, he aims to identify the risks of each position and balance off these risks in the portfolio by taking a diversified approach and ensuring extra risks are only taken when there is extra potential reward on offer.
ESG
ESG - Integrated
This fund operates in a specialist sector which has considerable involvement with industries many investors would consider unpalatable. To mitigate this, the fund has high-level exclusions which remove around a fifth of the initial universe. This includes revenue limits for coal and nuclear power, as well as those breaching the UN Global Compact on human rights, labour and anti-corruption.
Beyond this, Alex undertakes ESG analysis on all of his portfolio companies. He wants to understand the sustainability of a company’s assets, as much of what they invest in is immovable and therefore consequences of this must be considered. This sustainability focus also aims to avoid the risk of stranded assets, or a loss of license to operate through mismanagement. Within this, projects will need to have sustainable cash flows and therefore Alex considers the impact of infrastructure projects on a variety of stakeholders including employees, customers, shareholders and wider society to ensure the operation can continue without fear of interruption or damage.
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