Fund Profile


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.

Green shoots are appearing for HICL’s dividend cover…

HICL Infrastructure (HICL) is the sector bellwether, having delivered steady returns of 8.7% per annum on a NAV total return basis (since IPO to 30/09/2023). Since the recent interim results, which gave cause for optimism on several different fronts, the discount to NAV has narrowed. That said, as we discuss in the Performance section, the current share price discount to NAV implies the market’s estimation is of a further increase in the discount rate of 1.5%, from which we can derive an attractive prospective net total return for shareholders of 8.4%.

As we highlight in the Gearing section, £324m of divestments have been agreed so far during the current financial year at or above their respective valuation at 31/03/2023, which we estimate will bring gearing down to 10% of net assets. One might argue that the discount to NAV at which the shares currently trade implies that the discount rate used to value the assets should be higher. On the other hand, disposal activity is occurring at or ahead of valuations, signifying that the current discount rate is justified by market transactions.

In terms of income, HICL’s interim results provided grounds for some pre-Christmas cheer. HICL’s dividend cover has been relatively thin since COVID-19 negatively impacted several demand-based assets. However, as we discuss in the Portfolio section, on a few fronts, there are grounds to expect revenues to materially improve. As well as operational performance, inflation is an important factor that the managers highlight that should provide a lasting tailwind to revenues and, with contractual lags, see a meaningful improvement in dividend cover in 2024.

Analyst's View

HICL’s portfolio continues to evolve. Aside from reporting improving dynamics from some significant assets, the manager’s disposal activities are improving the mix. With capital markets effectively closed, the board and InfraRed have stated it is their priority to reduce short term gearing. They have made good progress so far.

We believe there is evidence that HICL’s dividend cover is on an improving trend. We discuss in the Portfolio section that is a result of operational improvements, investment activity that actively increases the exposure to inflation, and also contractual time lags increasing revenues as a result of last year’s inflation. If the discount to NAV remains once debt has been reduced, there is clear potential for some surplus cash to find its way into buybacks, providing support to the share price.

With the share price implying a net prospective total return from the portfolio of 8.4%, HICL therefore offers a material return premium when compared to bonds. However, HICL’s cash flows have a high correlation to inflation, which is part of the reason that we believe there are strong signs of green shoots to a recovery in HICL’s dividend cover. As we discuss in the Discount section, if achieved, this could provide a catalyst to a re-rating in the shares, enhancing returns to shareholders. Given the underlying risk characteristics that HICL exhibits, the prospective returns must surely be considered attractive in absolute terms and on a risk-adjusted basis.


  • Lower-risk, institutional-quality infrastructure assets within a liquid vehicle that has scale
  • Steady and resilient yield, with a dividend that is cash-covered
  • Returns are positively correlated to inflation


  • Evolution of the portfolio is exposing shareholders to new risks
  • Capital is at risk if the manager is unable to continue to extend the weighted average asset life
  • Dividend cover is relatively low, at 1.05x on a cash basis
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

17 Jan 2024 Top of the Pops
We reveal the winners of our investment trust ratings for 2024…
20 Dec 2023 Fund Analysis
Green shoots are appearing for HICL’s dividend cover…
09 Aug 2023 Should I stay, or should I go?
Re-appraising the invitation to the bond party…
07 Jul 2023 Fund Analysis
HICL’s portfolio continues to evolve, building foundations for dividend growth…
03 May 2023 Alt-right or alt-wrong?
Infrastructure and renewables have moved from alternative to mainstream assets - what could be next..?
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…
16 Dec 2022 Fund Analysis
HICL’s portfolio continues to broaden but the shares have been de-rated...
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
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