Ajay Dayal (Legg Mason)

“The fund has a favourable risk-return profile”

“RARE prides itself on having a team of infrastructure specialists managing funds, not fund managers managing infrastructure.” (Photo: DR)

“RARE prides itself on having a team of infrastructure specialists managing funds, not fund managers managing infrastructure.” (Photo: DR)

As part of the 10x6 Keytrade: 10 fonds d’investissement, 10 stratégies organised by the Paperjam Club on Wednesday, 21 November 2018, one of the speakers, Ajay Dayal (Legg Mason), explains his vision of the financial markets.

Can you briefly introduce yourself as a fund issuer? What are your specificities (size, specialisation, history…) compared to other market players?

“Legg Mason is one of the world’s largest asset managers and is dedicated to money management. The most distinctive feature of Legg Mason is its specialised approach to managing money. It houses a selection of prestigious investment management businesses, each operating autonomously and focusing on a distinct segment of the market. 

RARE Infrastructure is a specialist investment manager of global-listed infrastructure securities established in August 2006, joining Legg Mason in October 2015. RARE was founded to enable investors to access the risk/return profile available in unlisted infrastructure assets from portfolios of listed infrastructure securities. 

RARE provide investors with portfolios managed by an experienced team of specialists investing in high-quality listed infrastructure companies. The firm’s investment and risk management approach is reflected in its name – Risk Adjusted Returns to Equity (RARE), with the risk/return relationship being a prime focus. RARE prides itself on having a team of infrastructure specialists managing funds, not fund managers managing infrastructure.

What is the investment strategy of the product presented during this event? What are its features? How does it help you achieve a better return – or better risk control? 

“The investment strategy is to provide a fund that has a focus on long-term stable returns and aims to provide investors with a balance between income and capital growth, whilst providing protection against inflation. We do this by investing in 30–60 listed infrastructure securities drawn from a proprietary investment universe of 200 global infrastructure securities that meet RARE’s distinct view on infrastructure, avoiding the biases that the team believe are typically introduced by other infrastructure universes.

The firm believes that the discrepancy between the infrastructure stocks fundamentals and daily market pricing presents significant opportunities for investors with strong research bases and long-investment time horizons to capitalise on mispriced infrastructure investments and enhance potential long-term returns.

Typically, the fund has a favourable risk-return profile, and a lower correlation and beta with global equities when compared to other equity investments. As an asset class, infrastructure produces stable cashflows, the possibility of inflation hedged returns, and strong diversification. By investing in listed infrastructure versus unlisted, RARE can take advantage of lower costs, greater liquidity, and the flexibility to take advantage of market opportunities.

In the current situation of the financial markets (low rates, volatility…), how does your product respond particularly well to the current demand for individuals for investment funds? In other words, how does your product adapt to the specificities of today’s markets?

“The RARE Infrastructure Value Fund offers investors a transparent and liquid exposure to global infrastructure asset class with the benefits of income and inflation protection to smooth over the difficulties of a low interest rate environment, or the concerns of rising inflation, whilst still preserving and growing real capital values long term. The strong cash generation and growth of cash flows, and in-turn profitability and dividends, of many infrastructure companies means many are considered more defensive investments. 

With global markets becoming increasingly volatile, and equities falling from their highs, investors should be rewarded by holding more defensive assets with predictable returns. Historically, the RARE Value Fund has only captured about half the downside of equity markets over the long term, whilst capturing a higher proportion of the upside. This asymmetry allows investors some diversification compared to the broad global equity markets.

Our relatively conservative approach to investment helps ensure that the expected return from investments more than compensates for the risks.”

You can register for the 10x6 Keytrade on the Paperjam Club website.