3i Infrastructure (3IN)

3i Infrastructure (LON:3IN) targets NAV total returns of between 8% and 10% per annum from investment in privately-owned ’economic infrastructure’ companies in Europe. As we discuss in the Portfolio section, the management team look for not only unique companies with very specific attributes, which will lend them a strong element of predictability, but also those which are capable of outperformance and upside.

It is worth noting that the managers invest in operating companies and, as such, the portfolio is closer to a private equity portfolio than a core infrastructure trust, which might invest in PPP contracts and toll roads. These tend to have fixed lives and a higher proportion of returns being delivered from income. As such, as we discuss in the Performance section, these are potentially higher-risk investments than those within core infrastructure and are represented by a much higher discount rate, and 3IN has outperformed historically in NAV terms.

With net assets of c. £3.1bn, the portfolio is relatively concentrated with 13 underlying investments. However, the managers aim to maintain diversification by ensuring companies have exposure both to different drivers and also different megatrends.

Since IPO, 3IN has so far increased the dividend every year. The board’s dividend target for the year ending 31/03/2024 is 11.9p per share, representing a prospective share price yield, at the time of writing, of 4.1%. An interim dividend of 5.575p was declared in respect of the half year and the overall target was reiterated.