Geneva asset management boutique Quaero Capital is shifting the strategy of its real assets fund to invest in infrastructure equity alone as it is based on a ‘concept with limited appeal’, according to manager Mark Ebert.
The Quaero Real Assets fund has invested in forestry, agriculture, real estate and infrastructure since its launch in 2012.
The strategy is run by Ebert and Christopher Gelli, who have made the decision because the universe of agriculture and forestry stock is shrinking.
In turn, Ebert has gradually moved the fund’s exposure to sit at 100% invested in listed infrastructure stocks.
The fund has been a Ucits structure since autumn 2016 and will remain a long-only strategy.
Typically, real asset products were appealing for their yield and inflation protection but this theme is no longer in favour with the majority of investors, Ebert explained to Citywire Switzerland.
‘As interest rates start to normalise, investors may gravitate away from investing in infrastructure solely to capture yield and focus instead on infrastructure companies that reinvest their earnings in high return projects,’ he said.
The manager favours companies that have constructed a large asset that can’t be replicated. It then collects rent on this.
A top holding in the portfolio, at 2.5%, is Zurich airport, which is publicly owned.
In terms of subsectors, the manager invests heavily into toll roads, North American railroads and mobile mast companies, including American Tower and Crown Castle.
Sectors to avoid are ones that are sensitive to inflation changes and that rely on margins such as electrical generating utilities.
Over the past couple of years, Quaero Capital has built up its expertise in infrastructure, with the hire of three private equity infrastructure experts from Edmond de Rothschild.
Antione Turrettini, Sébastien Bourget and Yann Benharrouch are investment directors for the Quaero European Infrastructure fund.