Global Infrastructure Securities Strategy
Global Infrastructure Securities Strategy

Global Infrastructure Securities Strategy

 
 
 
Summary

The Global Infrastructure Securities Strategy seeks attractive long-term, risk-adjusted returns by investing in the equity securities of publicly traded infrastructure companies worldwide. The investment team utilizes proprietary research to drive a value-oriented, fundamental investment process that combines bottom-up and top-down analyses.

 
 
Investment Approach
Philosophy

The Global Listed Real Assets team believes that the performance of infrastructure securities is most highly correlated with the underlying value of their assets. In aiming to achieve core infrastructure exposure in a cost-effective manner, the team utilizes proprietary research to invest in the equity securities of publicly listed infrastructure companies that it views as offering the best value relative to their underlying assets and growth prospects.

 
Differentiators
Beyond Asset Focus

The team is biased towards those companies that can maintain a stable cash flow profile over time through high barriers to entry.

Secular vs. Cyclical Bias

We look for investment opportunities that work well in both weak and strong economic environments. More cyclical assets like ports or rails tend to have a higher “burden of proof,” or require greater discounts to intrinsic value. Look for mispriced assets that work with “zero growth.”

Approach

Focus on total return with less emphasis on income/dividend yield. Long-term investment approach has resulted in low portfolio turnover and helps limit trading costs.

 
 
 
Investment Process

The Global Infrastructure Securities Strategy is actively managed, utilizing internal proprietary research to implement a value-oriented, fundamental investment process that combines bottom-up and top-down research.

Bottom-Up Analysis

  • Information gathering: Through a review of public information and meetings with company management, the team evaluates each company’s historical operating results, accounting practices, and business goals and strategies. In order to better understand a company’s portfolio, the team may visit selected company-owned  and comparable assets.
  • Security evaluation and selection: Using proprietary valuation models, the investment team seeks to assemble a portfolio comprised of individual securities that it believes provide the best value relative to the companies’ underlying assets and growth prospects. The team maintains a disciplined focus on net asset value (NAV) or intrinsic value analysis as the primary valuation metric for evaluating companies within the investable universe. Results from this proprietary modeling are triangulated versus private infrastructure valuations and/or acquisition multiples to the extent available. The team believes that understanding private infrastructure value is vital, as publicly listed infrastructure  assets represent only a small portion of the overall universe.

Top-Down Analysis

  • Evaluation of cyclical factors: The team examines cyclical factors affecting infrastructure markets in order to determine which countries and sectors are most attractive on a relative basis. The supply and demand drivers of each physical infrastructure market within each country are analyzed to determine the potential risk/return characteristics of the companies’ underlying assets. The team also examines sector-specific factors and transaction activity.
  • Global allocation by sector and country: The output of the team’s top-down research is an asset-allocation framework that provides a suggested optimal exposure to each major economic infrastructure sector and country, with an overweighting to sectors and countries that the team believes offer the best relative value.
 
 
Portfolio Managers
Head of Global Listed Real Assets Investing
30 years industry experience
Managing Director
17 years industry experience
 
 
Insights
Investment Insight
Infrastructure Investing and the Shifting Macro Environment
Mar 06, 2017
As the start of 2017, the Global Listed Real Assets team took this opportunity to explore the impact of the evolving geopolitical landscape on infrastructure in the U.S.
Macro Insight
The Case for Global Listed Infrastructure Securities
Mar 19, 2017
Matt King, Portfolio Manager, Global Listed Real Assets, shares his investment proposition for global listed infrastructure securities
Investment Insight
Matt King Featured in Barron’s
Mar 03, 2017
In a recent interview in Barron’s, Matt King, Portfolio Manager, Global Listed Real Assets, shares his outlook for infrastructure under President Trump and discusses his top sector picks.
 
 
 
 

RISK CONSIDERATIONS  

Diversification does not protect you against a loss in a particular market; however it allows you to spread that risk across various asset classes.

There is no assurance that a portfolio will achieve its investment objective. Portfolios are subject to market risk, which is the possibility that the market values of securities owned by the portfolio will decline. Accordingly, you can lose money investing in this strategy. Please be aware that this strategy may be subject to certain additional risks. Companies within the infrastructure industry are subject to a variety of factors that may adversely affect their business or operations, including high interest, leverage and regulatory costs, difficulty raising capital, the effect of an economic slowdown or recession and surplus capacity, and increased competition. Other risks include technological innovation, significant changes in the number of end-users, an increasing deregulatory environment, natural and environmental risks, and terrorist attacks. In general, equity securities values also fluctuate in response to activities specific to a company. Investments in foreign markets entail special risks such as currency, political, economic, and market risks. Investments in small- and medium-capitalization companies tend to be more volatile and less liquid than those of larger, more established, companies. The risks of investing in emerging market countries are greater than risks associated with investments in foreign developed markets. Non-diversified portfolios often invest in a more limited number of issuers. As such, changes in the financial condition or market value of a single issuer may cause greater volatility. Illiquid securities may be more difficult to sell and value than publicly traded securities (liquidity risk).

 

This communication is only intended for and will be only distributed to persons resident in jurisdictions where such distribution or availability would not be contrary to local laws or regulations.

There is no guarantee that any investment strategy will work under all market conditions, and each investor should evaluate their ability to invest for the long-term, especially during periods of downturn in the market. Past performance is no guarantee of future results.

A separately managed account may not be suitable for all investors. Separate accounts managed according to the Strategy include a number of securities and will not necessarily track the performance of any index. Please consider the investment objectives, risks and fees of the Strategy carefully before investing. A minimum asset level is required. For important information about the investment manager, please refer to Form ADV Part 2.

Any views and opinions provided are those of the portfolio management team and are subject to change at any time due to market or economic conditions and may not necessarily come to pass. Furthermore, the views will not be updated or otherwise revised to reflect information that subsequently becomes available or circumstances existing, or changes occurring. The views expressed do not reflect the opinions of all portfolio managers at Morgan Stanley Investment Management (MSIM) or the views of the firm as a whole, and may not be reflected in all the strategies and products that the Firm offers.

All information provided has been prepared solely for information purposes and does not constitute an offer or a recommendation to buy or sell any particular security or to adopt any specific investment strategy. The information herein has not been based on a consideration of any individual investor circumstances and is not investment advice, nor should it be construed in any way as tax, accounting, legal or regulatory advice. To that end, investors should seek independent legal and financial advice, including advice as to tax consequences, before making any investment decision.

DEFINITIONS

Net asset value (NAV) represents the underlying asset value of a company.

OTHER CONSIDERATIONS

The indexes are unmanaged and do not include any expenses, fees or sales charges. It is not possible to invest directly in an index. Any index referred to herein is the intellectual property (including registered trademarks) of the applicable licensor. Any product based on an index is in no way sponsored, endorsed, sold or promoted by the applicable licensor and it shall not have any liability with respect thereto.

The Dow Jones Brookfield Global Infrastructure Index is a float-adjusted market capitalization weighted index that measures the stock performance of companies worldwide that exhibit strong infrastructure characteristics. The Index intends to measure all sectors of the infrastructure market. The index is unmanaged and should not be considered an investment. It is not possible to invest directly in an index.

The information presented represents how the portfolio management team generally implements its investment process under normal market conditions.

Morgan Stanley Investment Management is the asset management division of Morgan Stanley.  

 

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