Investors looking to avoid paying a premium for infrastructure funds have until 4 December to take part in the IPO (initial public offering) offer for a new fund with a difference. We think the shares are worth buying.

Tri-Pillar Infrastructure Fund will be advised by CAMG which is run by former bosses of John Laing Infrastructure Fund (JLIF).

CAMG’s chief executive Andrew Charlesworth says Tri-Pillar’s proposition is ‘completely different’ to its peer group. He believes investors could potentially make greater returns versus other infrastructure funds due to the type and location of assets being targeted.

Tri-Pillar is targeting 4.5% annual dividend (2.25% in the first year) and 8% to 10% annual total return (share price appreciation and dividend) over the long-term.

All the rival quoted infrastructure investment trusts trade at a big premium to their net asset value. For example, you would currently pay 5.8% more for John Laing Infrastructure’s assets than they are worth; or a 13.2% premium for GCP Infrastructure’s (GCP) assets, according to analysis by AIC and Morningstar.

Tri-Pillar is letting retail investors take part in its IPO; anyone interested can apply through a stockbroker such as AJ Bell Youinvest. By doing so you wouldn’t pay a premium to net asset value. The fund hopes to raise up to £200m.

The UK infrastructure sector has become a crowded space as numerous funds and other finance houses compete to buy assets with long-term, regular cash flows. That’s pushed up the price for assets plus there are very few available on the UK market.

Tri-Pillar is focusing on the US and Europe. It will invest in primary assets (i.e. new build projects) as well as secondary assets (projects already operational).

‘We believe we can invest in primary projects and potentially see their value double once they become operational,’ says Charlesworth. ‘We will also find ways in which to enhance their earnings.’

Tri-Pillar is currently in talks to invest £50m in a waste recycling project with a potential 15% to 20% yield. It is also bidding for a portfolio of European assets from a private fund being wound up.

The latter features a broad mix of assets including healthcare, education, road and communications projects. While there is no guarantee it will win the bidding process, Charlesworth is confident Tri-Pillar stands a good chance of winning.

‘The seller wants a competent buyer to do a deal with them. We’ve got lots of experience and Tri-Pillar benefits from being able to buy lots of different assets. Many other infrastructure funds have restrictions over what they can invest in.’ (DC)

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