For investors looking for inflation protection, a decent yield and stable cash flows backed by long term contracts, global infrastructure specialist BBGI Global Infrastructure (BBGI) ticks all the right boxes.

Since listing in December 2011, the trust has delivered a CAGR (compound annualised growth rate) of 9.3% a year in net asset value while the shares have delivered a CAGR of 9.1% a year.

The trust has a track record of paying a progressive dividend which has increased by 3.1% a year on average since inception while the current yield is a decent 4.4%, based on a target 2022 dividend of 7.48p per share.

The trust’s 9% premium to NAV (net asset value) it is at the low end of the range over the last 12 months which has averaged 21.6% according to data provider Morningstar.

One of the key attractions of the trust is the inflation protection it provides.

Co-chief executive Duncan Ball said: ‘Our inflation protection isn’t perfect at 0.43% for every 1% increase in inflation but it is high quality given it is underpinned by annually updated contractual indexation in our project agreements.’

LOW RISK CONTRACTS

There is an estimated £5 trillion of investment required every year to 2030 to develop and support the world’s infrastructure needs according to an OECD (organisation for economic co-operation and development) report.

Central and local governments do not always have the necessary access to capital and technical knowhow to fulfil the demand, so they work through a public-private partnership model.

BBGI provides capital for which it is granted exclusive ownership rights to develop and operate an infrastructure project for a set period, known as a concession.

Once the infrastructure is available for use and meets certain pre-agreed conditions, BBGI receives ‘availability payments’ from the government or government-backed parties.

This means the credit risk is low while payments are not reliant on usage. BBGI operates across projects including schools, transportation, healthcare, affordable housing, and justice facilities.

The portfolio is well diversified and is currently comprised of 55 availability-based investments of which 99.5% are operational. The weighted average life of the portfolio is 20.8 years, up from 20.3 years in December 2021.

The portfolio is internally managed which means the focus is entirely on this portfolio and the managers avoid pursuing growth for its own sake. The trust has an ongoing charge of 0.87% a year, one of the lowest in the sector.

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