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Fund managers top up infrastructure on Labour alarm

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Fund managers top up infrastructure on Labour alarm

Fund managers have topped up their holdings in listed infrastructure funds as share price premiums in the sector dip on fears over a potential Labour party crackdown on private finance initiatives (PFI).

Although infrastructure funds trade on premiums to their net asset value, these have narrowed amid hostility from Labour towards the PFI projects to which many are exposed.

The five major mainstream listed infrastructure funds are all trading on premiums below their 12-month averages, and in all but one case at less than half the premium they enjoyed at the peak of their popularity over the past year.

Mark Wright at Seneca Investment Managers has been adding to his exposure to International Public Partnerships (INPP), which invests in public and social infrastructure assets.

Research by analysts at Jefferies found INPP had a 29% weighting to UK PFI investments, well below the 68% exposure for peer John Laing Infrastructure (JLIF) and 67% for HICL Infrastructure (HICL).

'We believe the concern over the scope and ability of a Labour government taking back control of PFI assets has been overdone,' he said.

'However, if this does come to pass, the impact on INPP would be limited as it has no acute hospital exposure, arguably the sector most exposed to potential government action,' he said.

'In recent years it has focused on non-PFI related assets such as the Thames Tideway super sewer and offshore power transmission assets. The operational performance of INPP's assets and customer satisfaction levels also ranks highly.'

Nick Peters, manager of a host of multi-asset funds for Fidelity International, has also added to his infrastructure holdings, and downplayed the risk to PFI assets from a Labour government. 

'Actually, we view that as an opportunity and we have added to our exposure,' he said. 'Generally, the feeling is there has been an overreaction.'

Peters added that infrastructure funds with older PFI assets on their books were likely to come under the most pressure from a potential Labour government. 'A number of the more recent contracts are much fairer,' he said.

Peters highlighted HICL as among his infrastructure picks. 'It's a really good diversifier for funds such as mine, when equities look fully valued,' he said.

Stock market filings also highlight Legal & General Investment Management, most famed for passive 'tracker' funds, as a recent buyer of BBGI (BBGI), having built up a 3.2% stake worth around £21.5 million by the end of last month.

Where there are buyers, there are sellers, however, and not all fund managers have been using the dip in infrastructure as an opportunity to top up positions.

Stock market filings show that Newton Investment Management sold a stake worth around £22 million in BBGI at the end of last month.

Thomson Reuters data meanwhile lists the Newton UK Income and Multi-Asset Growth funds as the biggest recent sellers of the infrastructure fund.

Newton has also trimmed its stake in John Laing Infrastructure Fund (JLIF), according to a stock market filing from last week, as have fund managers at Schroders.

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