UK – Legg Mason Global Asset Management is set to launch a UK-domiciled infrastructure debt fund that will target publicly traded debt securities at a time when pension funds are seeking new ways of securing stable, long-term income.
Institutionals accustomed to investing in infrastructure equity are now seeking to diversify within the asset class by targeting infrastructure debt projects.
A number of asset managers have already launched new debt vehicles to meet this growing demand.
The fund, which will be available from early March and managed by Ian Justice – a portfolio manager at Legg Mason's global fixed income subsidiary Western Asset Management – will invest globally in publicly traded debt securities issued by infrastructure businesses.
Justice told IPE Legg Mason would like to see the fund returning more than 4% on a net of fees basis.
According to the company, this strategy should provide investors with daily liquidity and returns that are transparent and "easily" measurable.
Legg Mason also stressed that the emphasis would be put on bonds of infrastructure businesses that have a "leading position" in their sector, generate attractive and reliable cashflows and benefit from the pricing power their position affords them.
Justice said he would also consider other types of debt, including loans currently being put out for sale by banks.
"We have the scope to invest up to 10% in loans and secondary market," he said.
Around 75% of the fund's total asset value will be invested in core infrastructure debt securities such as transport, distribution and transmission utilities, social housing, PFI/PPP concessions and telecommunications network projects.
The asset manager said those securities would be predominantly issued by European businesses, but international issuers will also be considered.
The remaining 25% will be invested in non-core assets such as power generation, integrated utilities, renewable energy, telecommunication operators and stadiums.
This will include debt issued by global businesses that invest in infrastructure projects, as well as debt issued by infrastructure providers in Asia, Australia and the Americas.
Justice said issuers would include Australian and European airports, European motorways, European rail, utility companies, UK water companies and bonds issued by emerging market governments.