Justin Lannen, Co-founder and portfolio manager, Maple-Brown Abbott Global Listed Infrastructure, shares his views on infrastructure as an asset class, the need for tax transparency, and why ESG matters. 

Fund manager Maple-Brown Abbott is based in Sydney, Australia, with A$10bn AUM as of March 2022. Since its founding in 1984 the business has evolved to become a boutique of boutiques, focusing on distinct actively managed equity strategies for global clients. One of those boutiques is the Global Listed Infrastructure (GLI) business, which Justin co-founded with three other partners in 2012.

Justin is an advocate of responsible infrastructure investment that delivers benefits to society and returns to investors while also helping the economy transition to Net Zero by 2050. He is also “a bit of a toll road aficionado.”

In 2020, GLI launched a common contractual fund (CCF) on the AMX platform.

1. Why did you launch a CCF and why did you choose AMX?

We launched the CCF version of our strategy in 2020 because our pension fund clients kept asking for one. They invest across multiple jurisdictions, which makes the post-tax position of their investments particularly important. The CCF offers them valuable tax efficiency and transparency.  

Our product team conducted thorough due diligence on various options and decided that AMX would be our best partner. We were impressed by their ability to provide an end-to-end service, not just support around taxation but also on the operational structure of the fund and on compliance and legal matters. These are all critical issues for our clients. 

It’s vital to us and our diverse clients that we have complete confidence in AMX, both in their ability to administer those investments and to handle the complex tax issues that arise from investing internationally. 

2. What’s the focus of your strategy?

As the name implies, we are looking at publicly listed infrastructure companies around the globe. But what we are really looking for are those with a natural physical monopoly or near monopoly status in their geographic region. That tends to mean physical networks that provide an essential service to local communities, such as water and sewage systems, telecoms towers, airports and toll roads.

Modern societies cannot survive without good infrastructure, but cities and regions tend to only have a single provider of key networks. That’s what we mean by natural monopoly, in that the infrastructure is essential to everyday life and the operator has little if any local competition. The companies we invest in are building and managing these sorts of strategic monopolistic assets around the world.

3. Why is infrastructure an important consideration now?

First, there is a shortage of good infrastructure globally and national governments are keen to build more to meet the growing demands of their citizens. That’s why we favour companies with strong investment programmes to expand and improve their services to the community. More importantly for our pension fund clients, infrastructure is a long-term asset that suits their investor profile and tends to be defensive compared to regular equities, particularly in declining or volatile markets.

It’s defensive because people tend to continue using essential infrastructure even during economic downturns. There are of course always exceptions, as the pandemic proved by reducing traffic at airports and on toll roads. You can see that in the way the asset class has underperformed equities since the start of 2020; despite recovering over the last 6 months, it remains around 20% below global equities.

However, infrastructure also provides a reasonable level of protection against inflation and that looks set to be a key factor for investors to consider in the years ahead. Meanwhile, the use of those infrastructure assets that suffered in the pandemic is increasing, with the traffic on roads back to pre-pandemic levels. In fact, in France where we invest in toll roads, the traffic is now higher than before Covid.

4. You’ve re-categorised GLI as an Article 8 fund under the EU SFDR – why? 

Analysing the ESG angle on infrastructure stocks is critically important for our investors. Not least because one of the biggest environmental themes we invest in is the energy transition needed to get us to Net Zero by 2050. 

Naturally, we are investing in windfarms, particularly offshore in the UK, and other forms of renewable energy. We particularly like the fact that many of these energy suppliers are under long-term contracts, which gives us a long-term cashflow profile and a stable income stream. At the same time, we are investing in energy transmission networks as they will need to be completely reconfigured to hit the climate goals that most countries have now agreed. 

The social aspect of ESG is also important because the cost of things like toll roads and energy supplies matter hugely to consumers. And of course, good governance is essential, which is why we like to meet with the companies we invest in, to ensure there are no conflicts of interest and that leadership teams are in alignment. 

That is where Article 8 re-categorisation comes in. Under the EU’s Sustainable Finance Disclosure Regulation (SFDR) it demonstrates to investors that the fund invests in companies with good ESG practices. This is an important sustainable investment category now for an increasing number of our institutional investors. However, re-categorisation is a complex process, so we were really pleased that AMX were able to work closely with us to pull it all together. 

5. How would you sum up the MBA GLI partnership with AMX?

AMX have been excellent at taking us through the complete process of establishing the tax-efficient CCF version of our strategy. They made a complex project relatively easy and stress free, particularly when it came to managing compliance issues. This included setting up centralised reporting, implementing all the relevant documentation and producing tax transparent information. 

AMX have helped us get the CCF out to the pension fund market, where we are now meeting more investors who want our infrastructure expertise. Essentially, AMX handles the end-to-end implementation, while we focus on managing our best investment ideas.