The IFSL Blackfinch NextGen Infrastructure Fund (GB00BQ2MXY08) was the best performing fund in Morningstar’s global ‘Equity Infrastructure’ category in December 2023. The fund was also ranked first within the Investment Association's Infrastructure sector both for December and since its inception.
At Blackfinch, we are choosing to do something different than our infrastructure sector peers, so there is no reason to expect results that align with the indices. At times we may underperform, and at times we may outperform, but at all times we will do our best to think and act independently. Over longer periods, we believe we will be rewarded for taking an unconventional approach to infrastructure investing and separating ourselves from the herd. We continue to believe that the companies we hold (such as GFL Environmental Inc., OX2 and Rai Way S.p.A.) have better business models, more properly incentivised management partners, and greater future earnings potential than the average infrastructure company.
Our strategy centres on buying high quality specialist infrastructure companies prioritising capital appreciation over income, supported by ‘next generation’ growth themes – such as the energy transition and digitalisation – that are trading at reasonable valuations and led by well-incentivised management teams. If our analysis is sound, with time we should benefit from the dual forces of improving business fundamentals and improving sentiment, which could help the fund achieve its target net total return of 8-10% annually over three to five year rolling periods.
Those returns will not come in a straight line. While we expect to have periods of exceptional performance, we believe that focusing on our process, not on outcomes, will be our best defence during difficult periods. At the micro level, the opportunity to successfully iterate our process and invest in high quality growth-led (and not income-led) infrastructure companies – where the odds of success are heavily skewed in our favour – is rich. A further analysis of the fund’s top contributors and detractors is in our monthly factsheet.
Disclaimer: Capital at risk. Past performance not indicative of future results. This post does not constitute any form of solicitation to buy or sell units in the fund. For UK investors only.