Fund Profile

Disclaimer

Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by HICL 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
A new version of this profile is available. View Latest
Overview

HICL’s primary aim is to provide a sustainable and steady income stream, with low correlation to changes in GDP or equity markets. Over the last decade and a half, the trust has grown net assets to £3.0bn and in the process acquired a diversified portfolio of 116 institutional-quality, lower-risk core infrastructure assets (as at 31/03/2021).

The portfolio has largely proved resilient through the COVID-19 crisis. That said, the demand-based assets have been negatively affected by government restrictions on travel. As we discuss in Portfolio, two out of the three assets in this category are now on a path to recovery, which gives credence to the board’s guidance that the current financial year should see a covered dividend once again (see Dividend).

Private infrastructure investments require a significant level of expertise to evaluate and manage, and HICL offers a liquid and simple way of accessing the asset class at relatively low cost (see Charges). Over time the managers seek to improve the mix of assets within the portfolio to optimise returns, and prolong cashflows. It is noteworthy that the weighted average life of the portfolio's assets has increased to 29 years compared to 28 years at the time of HICL's IPO, despite the passage of over 15 years.

The dividend for the year to 31 March 2021 of 8.25p per share was cash covered only 0.9 times. We understand that the board and managers remain focussed on the continual improvement to the long-term sustainability of the dividend. The board has announced that the targeted dividend for the current financial year is expected to be fully cash covered.

Kepler View

HICL’s attraction is primarily as a prodigious payer of dividends. That the NAV has also grown strongly since IPO is reflective of InfraRed’s management but also declining interest rates around the world and strong demand for the types of assets that HICL owns. As the board highlights in the recent report and accounts, HICL pays comfortably the highest (cash) dividend amongst its core infrastructure peer group.

At 8.25p, HICL offers a prospective yield on the current share price of 4.8%. This compares to global equity-income trusts’ historical yield of 3.7%. With a dividend target from the board now extending two years out, HICL compares well on both the solidity and extent of its dividend.

HICL’s premium to NAV is currently higher than the five-year average premium of 8.6%. Yet, HICL’s premium rating is considerably lower (and in our view therefore more attractive) when viewed next to directly comparable peers BB Global Infrastructure (BBGI) and International Public Partnerships (INPP) which trade on premiums of 29% and 20% respectively. In our view, HICL’s lower premium reflects its exposure to demand-based assets, which have led it to pay an uncovered dividend last year. With economies experiencing a strong rebound in activity, we expect that the demand-based assets will contribute positively to cashflows and NAVs as time goes on. There remains uncertainty on one asset (High Speed 1) but, if international travel resumes ahead of expectations, this will be a positive for both the NAV and likely the rating of the shares.

bull bear
Lower-risk, institutional-quality infrastructure assets within a liquid vehicle that has scale If COVID-19 continues to impact to demand-based assets, will act as a drag on income generation
Steady and resilient yield, proven defensive qualities during 2020 COVID-19 crisis with dividend forecast to be cash covered once again Capital is at risk, unless manager is able to continue to extend the weighted average asset life
Uncorrelated returns to equities Dividend uncovered last year
Continue to Portfolio
2022 Kepler Alternative Income Rated Fund

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

Fund History

16 Jun 2022 Fund Analysis
HICL is in a prime position to benefit from higher inflation….
11 May 2022 Catch a tiger by the tail
As inflation bites harder than it has for decades, we consider the best ways for investors to hang on to their capital...
04 May 2022 Time to change the record
We ask whether equities can still offer meaningful diversification or whether investors need to turn to alternatives…
09 Mar 2022 Private markets: A closer look at infrastructure and renewables
We examine the £27bn listed Infrastructure and Renewable Energy Infrastructure sectors…
21 Dec 2021 Fund Analysis
Cash covered dividend and link to inflation underlines HICL’s appeal…
01 Dec 2021 How to protect your portfolio from inflation
We highlight trusts which could appeal in an environment where 'transient' inflation is here to stay...
16 Jun 2021 Fund Analysis
Covered dividend target this year means HICL looks less expensive than peers…
12 May 2021 Riders on the storm
We look at the yields in the alternatives space and how they have been affected by the pandemic…
20 Jan 2021 Kepler's top-rated investment trusts for 2021
We update our annual quantitative ratings for investment trusts…
09 Sep 2020 Time to switch horses?
We look at what returns are likely from equity markets in the coming decade and identify which alternatives could offer similar or greater returns for lower levels of risk…
13 Aug 2020 Fund Analysis
HICL offer institutional quality infrastructure assets, delivering an attractive income...
23 Apr 2020 Sucker punch
Two of our analysts debate the merits of equity income and alternative income trusts at this point in time...
29 Oct 2019 Fund Analysis
Institutional quality infrastructure assets, delivering an attractive income...
09 Oct 2019 Bond proxy?
As a replacement or complement for longer duration bonds, listed alternative income funds look an interesting, well… alternative..
06 Mar 2019 Stairway to heaven
Our research shows that reinvesting the income generated by alternative assets could add a significant boost to long-term portfolio performance…
14 Feb 2019 Fund Analysis
Predictable cashflows, uncorrelated to the economic cycle
View all

Welcome to Kepler Trust Intelligence

Kepler Trust Intelligence is authorised in the UK by the Financial Conduct Authority.
Please enter a valid email address
{{item.msg}}
Please enter a valid password
{{item.msg}}
Please enter a valid email address
{{item.msg}}
Please check your email. If an account exists you'll be sent instructions on how to reset your password.
Kepler Trust Intelligence is authorised in the UK by the Financial Conduct Authority. To ensure that we are able to provide content which is appropriate for you, please tell us a little about yourself.
Please choose an option
{{item.msg}}
Please enter a company name
{{item.msg}}
Please enter a location name
{{item.msg}}
Please choose an option
{{item.msg}}
Please enter a platform
{{item.msg}}
Please choose an option
{{item.msg}}
Please enter a trust
{{item.msg}}
?
The information contained herein is not for distribution and does not constitute an offer to sell or the solicitation of any offer to buy any securities in the United States to or for the benefit of any United States person (being residents of the United States or partnerships or corporations organised under the laws thereof). The investment funds referred to herein have not been registered in the United States under the Investment Company Act of 1940 and units or shares of such funds are not registered in the United States under the Securities Act of 1933.
Please confirm
{{item.msg}}
Please select an option
{{item.msg}}
See benefits
A free Kepler Trust Intelligence account allows you to access premium content including the ‘Kepler View’ – our verdict on the trusts we cover – and historical research so you can see how our view has changed over time. An account also unlocks useful facilities like the ‘follow’ button which lets you keep track of the trusts you’re interested in and as a logged in user you can also download PDFs of our research, and choose the layout of the page you’re reading to suit your preference. We will not share your details unless you give us permission to do so, and we won’t bombard you with emails – we only send one a week.
Please select an option
{{item.msg}}
Please enter your first name
{{item.msg}}
Please enter your last name
{{item.msg}}
Please enter a valid email address
An account already exists with this email - have you forgotten your password?
{{item.msg}}
Please enter a valid password
{{item.msg}}
Please enter a valid password
{{item.msg}}
How will this information be used? Your answers help us to tailor our content to relevant investment trusts, and to ensure that the asset allocation and portfolio strategy research we produce is appropriate to our userbase.
Our Website uses Cookies Cookies are small text files held on your computer. They allow us to give you the best browsing experience possible and mean we can understand how you use our site. Some cookies have already been set. You can delete and block cookies, but parts of our site won’t work without them. By using our website you accept our use of cookies. For further information please refer to the Kepler Privacy Notice.
Need help?

One more thing...

Did you know, you can 'follow' individual trusts on Kepler Trust Intelligence? Use the functions below to set up alerts and we'll send you research and updates on your chosen trusts.

Suggested trusts to follow

Browse all funds
Need help?
Current Site Kepler Trust Intelligence is produced by the investment companies team at Kepler Partners and is the UK’s premier source of detailed qualitative research on investment trusts. Absolute Hedge is a market leading UCITS research database providing proprietary research on funds, themes and strategies in the UCITS space. Kepler Liquid Strategies is a Dublin domiciled UCITS fund platform featuring a number of best-of-breed fund managers. Kepler Partners is a corporate advisory and asset raising boutique specialising in the regulated funds market in Europe and investment trusts in the UK.