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We recently attended a City power lunch with an old colleague, which among other things got us thinking about labels and categorisation. As we opened our ‘Pret a Manger’ sandwiches and admired the excellent view of the roadworks on Old Broad Street, we got talking about markets and during the conversation the phrases ‘core infrastructure’ and ‘renewables’ came up a couple of times. Afterwards, we thought “are those really useful labels anymore? And is investor behaviour influenced by the implication contained in the word ‘core’?”. This word doesn’t appear in any formal sector name, but ‘core infrastructure’ is a very common phrase, both in speech and in investor presentations. When one thinks about it, ‘core’ is quite a powerful adjective. This is particularly so when it’s used in the same sentence as ‘renewables’, which isn’t awarded automatically that same adjective and so by implication is non-core, or possibly even ‘satellite’, as they might say in fund management circles. Now that Renewable Energy Infrastructure funds, as a group, are trading at a discount to net asset value averaging c. 4%, now may be the time to take a closer look.
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