Fund Profile

BBGI Global Infrastructure 23 October 2024

Disclaimer

Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by BBGI Global Infrastructure. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.

Overview
BBGI’s low-risk strategy has delivered strong dividend growth...
Overview

BBGI Global Infrastructure (BBGI) owns a globally diversified portfolio of low-risk availability-based infrastructure projects, focussed on highly rated infrastructure investment destinations such as the UK, Canada, Continental Europe, Australia, and the US, with AAA/AA credit ratings. The trust currently yields c. 6.6%, while comparable government bonds yield c. 4%. Unlike fixed-rate government bonds, the Portfolio has contractual links to inflation and BBGI has achieved a progressive dividend since its IPO in 2011, while the team estimate that even with no further investments, the trust could continue with a progressive Dividend for another 15 years.

The current Discount of c. 12% is narrower than the peer group average of 15%. Over the last five years, BBGI's NAV total return of 43% has exceeded the peer group average of 26%. Annualised dividend growth since IPO in 2011 is 3.4%. In 2023 BBGI grew its dividend by 6% and is on target to do the same again in the year to 31/12/2024, illustrating the benefit of its inflation-linked contracts and the defensive nature of the portfolio. Since IPO, BBGI’s 8.5% annualised NAV total return is comfortably ahead of its long-term 7-8% target return.

BBGI is net cash at a company level, although as is usually the case with infrastructure assets, individual assets are geared. In almost all cases BBGI’s portfolio assets are geared using fixed-rate debt that amortises over the life of the specific asset and thus there is almost no refinancing risk.

BBGI is internally managed, meaning that the Management team are all employees of the trust, and it is their sole focus. It also means BBGI has relatively low Charges compared to the peer group.

Kepler View

Inflation linkages, explicit or implicit, are not uncommon in infrastructure investing. BBGI’s linkages are explicit, and with a diversified portfolio of low-risk availability assets, coupled with largely fixed-rate debt at an asset level, the resulting increases in income have flowed through to strong dividend increases. Overall, we think this outcome is evidence that BBGI occupies the low end of the risk spectrum in its peer group. While we imagine investors won’t have welcomed BBGI’s discount to NAV, the absolute level is lower than the peer group average, which we think is a reflection of the confidence its shareholders have in the strategy, something we look at in the Discount section. Another perspective on the discount is that it is too wide, undervaluing the assets. We also highlight some data that supports this in the Portfolio section, which shows that the discount rate implied by the portfolio valuation has returned to its long-term average, and after factoring in the discount to NAV, is well above.

BBGI's internally managed structure aligns management’s interest with that of the shareholders. For example, traditional investment trusts which are managed by an external manager have their fees based on a percentage of assets under management (AuM) i.e. the manager earns more if the trust grows, and thus has an incentive to continue to grow the AuM or have multiple funds to manage. There's no doubt in our minds that very often, growing trusts is a good thing, as scale brings many benefits, but in a tougher environment, investors know that BBGI's team don't have competing interests elsewhere to raise new capital and can stay focussed on the existing portfolio.

Bull

  • Strong track record of beating target returns and paying a progressive dividend
  • Inflation linkages have shown their worth in recent years, with dividend growth at twice the long-term average rate
  • Internal management structure has resulted in lower costs than the peer group and creates an alignment of interest with shareholders

Bear

  • There are wider discounts in other infrastructure trusts
  • With inflation abating investors should expect less inflation-linked dividend growth in future
  • Overall investor sentiment towards infrastructure trusts remains weak
Continue to Portfolio
2024 Kepler Alternative Income Rated Fund

This trust has been awarded a rating by Kepler Trust Intelligence for alternative income... Find out more

Fund History

08 Nov 2024 Monthly roundup: the budget’s impact, DGN's strategic review and our podcasts & results highlights
Jo and Ryan discuss the latest news, reviews and interviews in the investment trust world...
07 Nov 2024 Trust Issues: the outlook for investing in infrastructure with BBGI CEO Duncan Ball
BBGI is more than just a bond proxy…
23 Oct 2024 Fund Analysis
BBGI’s low-risk strategy has delivered strong dividend growth...
21 Oct 2024 High quality infrastructure trusts look good value
3IN and BBGI: Not the widest discounts, but perhaps the most likely to snap back…
30 Aug 2024 Results analysis: BBGI Global Infrastructure
With strong operational and financial performance and interest rates stabilising, BBGI offers an attractive prospective real return…
03 Apr 2024 Results analysis: BBGI Global Infrastructure
BBGI offers long term income and capital growth and, on the current wide discount, could be an interesting option for those seeking exposure to infrastructure assets…
13 Mar 2024 Roller coaster ride
Thematic funds have seen significant outflows over the past two years…
21 Mar 2024 BBGI Global Infrastructure
Duncan Ball
Rewatch this webinar as part of our month-long online series 'Themes for your ISA in 2024' hosted by the team at Kepler Trust Intelligence throughout March...
Watch Recording
17 Jan 2024 Top of the Pops
We reveal the winners of our investment trust ratings for 2024…
22 Nov 2023 Fund Analysis
BBGI’s conservative and defensive portfolio offers returns directly linked to inflation…
04 Oct 2023 Get real
The prospect of attractive real returns seems to be ignored by the market…
06 Sep 2023 Results analysis: BBGI Global Infrastructure
BBGI’s availability-style holdings proved robust in H1…
09 Aug 2023 Should I stay, or should I go?
Re-appraising the invitation to the bond party…
02 Aug 2023 Isn’t it ironic?
Alternatives: not equities, not bonds, but a bit of both...
24 May 2023 Five alternatives for income investors
Watch the presentations from our event focused on trusts delivering income via a diverse range of strategies…
19 May 2023 Fund Analysis
BBGI’s increased target dividends is underpinned by its inflation linkage…
17 May 2023 BBGI Global Infrastructure
Duncan Ball
Rewatch this webinar from our online series in May 'Alternatives for income investors' hosted by the team at Kepler Trust Intelligence 15-19 May…
Watch Recording
03 Apr 2023 Results analysis: BBGI Global Infrastructure
Last year’s performance shows why BBGI’s inflation linkage is so compelling…
22 Mar 2023 Good vibrations
We identify some sectors with structural discounts we think could close over time…
11 Jan 2023 Solving the Rubik’s Cube
We reveal the winners of our investment trust ratings for 2023…
09 Nov 2022 Fund Analysis
BBGI has clear differentiating features within the infrastructure peer group...
20 Jan 2021 Kepler's top-rated investment trusts for 2021
We update our annual quantitative ratings for investment trusts…
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