InvestmentsJan 27 2016

GCP unveils open-ended UK infrastructure fund

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Gravis Capital Partners has unveiled the first UK-focused open-ended Ucits infrastructure fund for income and modest growth.

The VT UK Infrastructure Income Fund, which launched on 25 January, is aiming for annual dividend yield of 5 per cent, to be paid quarterly.

To date, the infrastructure sector in the UK has only been accessible to non-institutional investors through closed-ended investment trust structures,

According to a spokesman, the fund will invest in companies in the infrastructure sectors listed in the UK such as healthcare, education, power generation and distribution.

The fund will hold between 20 and 25 stocks and sit in the Investment Association UK Equity Income sector with the aim to provide protection from inflation.

The retail share class will have an annual management charge of 0.75 per cent. Ongoing charges will be capped be capped at the same level until the end of 2018.

The VT UK Infastructure Income Fund will be available on 14 investment platform including FundsNetwork, Old Mutual and Transact and can be held in Isas, Sipps, offshore bonds or directly.

Provider view

Stephen Ellis, senior partner of GCP said: “The creation of this fund will enable investors who prefer to invest in Oeics an alternative way to access solid growth asset classes and we expect UKIIF to look after investors’ capital, deliver consistent growth above the rate of inflation and pay a stable, dependable income from assets which are critical to the UK’s society and economy.”

Adviser view

Simon Torry, chartered financial planner at Essex-based SRC Wealth Management, said: “This product does sound interesting. From what I have heard, the growth potential in the UK infrastructure sector is quite good because the UK’s economy is fairly healthy.

“When investors see bad news they get nervous but my view is it could be good to invest when things are messy. It is the job of advisers to explain the risk of investments to clients and to providing a balanced portfolio to mitigate risk.”

He added: “The AMC seems to be in line with the market average. I think the company will only raise their ongoing charges after 2018 only if the fund generates a lot of money. The thing to bear in mind when it comes to charges is that they are only one side of the story – you have to keep a keen eye on the returns. I have no qualms in paying for a fund which goes on to record impressive performance.

“Investors should be careful not to put all their eggs in one basket. It is important to diversify.”

Charges

0.75 per cent AMC as an ongoing charge respectively.

Verdict

2015 was a turbulent year for global equities, which were blighted by the Greek debt crisis and the slowdown in the Chinese economy. The events of the past year may have forced investors to reconsider their attitude to risk and opt for lower risk funds investing in companies operating in developed countries, promising lower yield compared to the more risky EM funds.

The VT UK Infrastructure Income Fund is likely to attract interest. The UK infrastructure sector could provide stable returns at a time of instability and uncertainty in global equity markets. It could emerge to be a good proposition within a well diversified portfolio.