How Lazard's Infrastructure Fund has beaten the market for 20 years

Investors looking to shelter from the wild swings in markets in 2025 could consider the Lazard Global Listed Infrastructure Fund, according to its portfolio manager Warryn Robertson.

Over the March quarter, the Lazard Fund returned returned 7.2% after fees to beat the MSCI All World Index's return of -2.7%, as investors sold richly-valued growth stocks and rotated into infrastructure businesses known for their defensive profits and dividends. 

The $2.3 billion fund that Robertson and the team manage, typically owns between 25 and 50 global stocks in the airports, toll road, shipping, utilities and energy infrastructure sectors. 

He says the reliable nature of these types of businesses means they're generally prized for their steady dividend payments and growth, among other qualities.  

"We look to buy businesses that have monopoly-like characteristics, with inflation protected revenue and solid income streams in a stable regulatory environment," the fund manager tells Livewire. "So these are low risk investments, except when the government wants to interfere."

The seasoned stock picker estimates there's around 400 stocks globally that fit into the global infrastructure asset category, although less than 90 of them tick the right qualitative boxes as potential investments. 

"Infrastructure's a vibrant asset class with a number of opportunities, but you've still got to be selective about the investments," he says.

Income and growth 

Lazard's fund will turn 20 in October this year, and pays a quarterly distribution. It targets returns of 5% above the Australian consumer price index - a measure of inflation - over rolling five-year periods. 

But Robertson said the fund has historically delivered an income stream of around 6% to 7% to investors, which is made up of dividends from stock holdings at around 4% to 4.5% and capital gains via investment appreciation of 2% to 2.5%. 

"The yield is an outcome of what the companies pay in terms of dividends and what the companies pay in terms of capital gains," says Robertson. "So the yields are a result of investing in great businesses that pay solid dividends and good old-fashioned investing where you buy low and sell high.

"And if the sell side brokers are right, the stocks we own will produce better earnings growth than the market generally, so you've got defensive assets, high dividend yield, stronger earnings growth than the market, and many of the stocks are trading at a discount."

Defensive positioning 

As of the start of May, Robertson says the fund is still positioned slightly defensively to help see it through potential share market sell-offs related to the impact of the trade war between the US and China. 

The fund tends to outperform the broader market during uncertain times or general downturns as in the March quarter, because infrastructure assets are defensive and not sold-off like businesses that may suffer more in the event of rising unemployment or interest rates. 

In other words, people will still use toll roads, airports, gas and electricity even during shocks like a trade war, pandemic, or financial crisis. 

"You wouldn't say anything's bullet proof, but that's what infrastructure is all about. People don't stop driving across Sydney Harbour Bridge because there's a trade war with China," says Robertson.

"If you look over the very long term, going out 20 years, we've done 10% per annum. Markets have done close to 8%. So, in spite of the Global Financial Crisis, Covid-19, and a whole bunch of exogenous shocks it's been consistent. And I think that's going to serve us well over the next 6 to 12 months."

Looking to cheap valuations in Europe

As of April 30, the fund's top sector allocations were in toll roads, diversified utilities, railroads and airports. 

Robertson says the fund has reallocated some of its investment weightings away from once-popular US markets to Europe, meaning the continent is now its top regional holding at 43% of the fund's total net asset value. 

Its top stock holdings include monopoly-like British energy supplier National Grid, global airports and tollroad owner Ferrovial, alongside Italian airport and toll road giant Vinci. 

Robertson says many of these European infrastructure players still trade at a discount to the market, with the average price-to-earnings multiple of the fund's holdings is now significantly below the average in the MSCI World Index. 

"Many of these companies have historically traded on a slight premium… today, they’re on a discount," he says. "And you're getting paid a nice, big, thick, juicy dividend."

As to the outlook, the fund manager says he's still cautious about valuations in the US, in the utilities sector for example, and thinks European infrastructure groups generally offer investors the best mix of value and income. 

Since its inception in 2005 the fund has returned a compound 10% per year, net of fees, to be 1.9% ahead of the 8.1% return of its benchmark, the MSCI World Core Infrastructure Index. The annual management fee is 0.98%. 

Learn more

The Lazard Global Listed Infrastructure Fund Active ETF (CBOE:GIFL) offers access to an attractive asset class with low correlation to global equities and fixed income over the long term and is managed by one of the world's most experienced listed infrastructure teams. Find out more below, or by visiting the Lazard website. 

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Lazard Global Listed Infrastructure Fund Active ETF (GIFL)

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