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AUGUST 3, 2022
Helen Price, Chief Financial Officer, Core Income Funds at InfraRed Capital Partners, discusses the benefits of investing in infrastructure during rising rates and inflation.
Steve Peacher: Hi everybody it's Steve Peacher from SLC Management and thank you for dialing into this episode. Today I’m with Helen price who is in London at InfraRed and is the CFO of their core fixed infrastructure funds. So, Helen thanks for taking a few minutes with us today.
Helen Price: Thanks so much, Steve
Steve Peacher: So, the topic that we want to talk about was the impact of inflation on infrastructure assets, so let me just start with that one, what is the main impact of inflation on infrastructure assets, especially since we're running at such high inflation rates around the world these days?
Helen Price: Yeah so, it's got a really important impact actually because infrastructure assets and the companies themselves have an ability to pass through higher inflation. And that means that investment funds are very highly correlated to inflation and they can benefit from increased revenues and also increased cash flows from the companies in which they invest. So we have investments in regulated entities, they have contracts that are linked to inflation. And they've got an ability to pass through inflation raises to their customers. We invest in toll roads and those have contraction mechanisms in them as well to enable you to increase your revenue in line usually with CPI. And then last but not least, we also have investments in in PPP, so public private partnerships, that are backed by governments and they are typically also linked to inflation. And we've really seen over the last couple of months as inflation has both increased in actual terms and also in forecast terms that listed infrastructure funds have done very well in terms of share price performance because of their inflation correlation.
Steve Peacher: So, is this correlation a key factor do you think when you look at the motivations for investors going into or maybe said this way, why is this inflation correlation that you mentioned so important for investors?
Helen Price: Because it helps to protect real returns, so enables investors capital to be better protected and so you know you can do that by investing in a carefully constructed portfolio that allows you to get the protection and allows you to both get growth but also higher revenues.
Steve Peacher: Obviously, higher inflation means higher interest rates and we've seen that across the globe, and so you know to what extent should investors in infrastructure be concerned about rising rates and the impact on valuations in the sector?
Helen Price: This is clearly something that we think about, and we've been very focused on it over the last six months. I think the first thing to say is that for us, we don't see interest rates and inflation moving in step and whilst we have seen increases in inflation, the competitiveness and the attractiveness of infrastructure assets is outweighing any impact of interest raises. These assets are in short supply, they provide long term stable cash flows for investors, and if you're trying to protect liabilities, they're absolutely great for that and they're also a really good hedge for you against stock market volatility, so we think the combination of all of that means that investors should be conscious of it, but that also competing and important items to protect you.
Steve Peacher: Well, I do think this is one of the asset classes, it's been hard to find any place to hide in this market with rates backing up and equities going down and the risk to other risk assets, but as a sector where you do have a major mitigant given some of the inflation correlation protections that you're talking about it, it does make an as a class like infrastructure stand out as maybe more attractive than other asset classes in in this kind of environment.
Helen Price: Exactly.
Steve Peacher: I like to end these with a personal question. Before we recorded this, we were talking about that you've recently been on vacation and you told me you read 10 books you're either on vacation for a month or your speed reader like my life is, so but anyway I’m always looking, I think our listeners are always looking for good book recommendation, so of the books you read what could you throw out to people?
Helen Price: The main one is the “Paper Palace,” I was away for two weeks so as always, a book a day. And for those of you who are fans of “The Devil Wears Prada,” the latest biography of Anna Wintour provides some real-life examples of that film, so I’d highly recommend that as well.
Steve Peacher: Okay that's great, well I got those written down, so I don't think I’ll get through those in a day, but I’ll do my best. So Helen thank you very much, that was really great and thanks to everybody for listening to this episode of “Three in Five.”
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About SLC Management
SLC Management is the brand name for the institutional asset management business of Sun Life Financial Inc. (“Sun Life”) under which Sun Life Capital Management (U.S.) LLC in the United States, and Sun Life Capital Management (Canada) Inc. in Canada operate.
Sun Life Capital Management (Canada) Inc. is a Canadian registered portfolio manager, investment fund manager, exempt market dealer and in Ontario, a commodity trading manager. Sun Life Capital Management (U.S.) LLC is registered with the U.S. Securities and Exchange Commission as an investment adviser and is also a Commodity Trading Advisor and Commodity Pool Operator registered with the Commodity Futures Trading Commission under the Commodity Exchange Act and Members of the National Futures Association.
BentallGreenOak, InfraRed Capital Partners (InfraRed) and Crescent Capital Group (Crescent), and Advisors Asset Management are also part of SLC Management.
BentallGreenOak is a global real estate investment management advisor and a provider of real estate services. In the U.S., real estate mandates are offered by BentallGreenOak (U.S.) Limited Partnership, who is registered with the SEC as an investment adviser, or Sun Life Institutional Distributors (U.S.) LLC, an SEC registered broker-dealer and a member of the Financial Industry Regulatory Authority (“FINRA”) . In Canada, real estate mandates are offered by BentallGreenOak (Canada) Limited Partnership, BGO Capital (Canada) Inc. or Sun Life Capital Management (Canada) Inc. BGO Capital (Canada) Inc. is a Canadian registered portfolio manager and exempt market dealer and is registered as an investment fund manager in British Columbia, Ontario and Quebec.
InfraRed Capital Partners is an international investment manager focused on infrastructure. Operating worldwide, InfraRed manages equity capital in multiple private and listed funds, primarily for institutional investors across the globe. InfraRed Capital Partners Ltd. is authorized and regulated in the UK by the Financial Conduct Authority.
Crescent Capital Group is a global alternative credit investment asset manager registered with the U.S. Securities and Exchange Commission as an investment adviser. Crescent provides private credit financing (including senior, unitranche and junior debt) to middle-market companies in the U.S. and Europe, and invests in high-yield bonds and broadly syndicated loans.
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The information contained in this website is not intended to provide specific financial, tax, investment, insurance, legal or accounting advice and should not be relied upon and does not constitute a specific offer to buy and/or sell securities, insurance or investment services. Investors should consult with their professional advisors before acting upon any information contained on this website. The assets under management (AUM) represent the combined AUM of Sun Life Capital Management (Canada) Inc., Sun Life Capital Management (U.S) LLC, BentallGreenOak, InfraRed Capital Partners, and Advisors Asset Management.
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UK Tax Strategy - InfraRed (UK) Holdco 2020 Limited
InfraRed (UK) Holdco 2020 Ltd is the UK holding company of InfraRed Partners LLP and a subsidiary of Sun Life (U.S.) Holdco 2020 Inc, which has its headquarters in the U.S. The company was incorporated to purchase InfraRed Partners LLP and acts solely as a passive holding company. The Tax Strategy for the InfraRed Holdco Group sets out our approach to the management of InfraRed Holdco Group UK tax affairs in supporting business activities in the UK.
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