Sprott Global Infrastructure Fund

October 2017 Commentary

Print

Year-to-date to October 31, the Sprott Global Infrastructure Fund generated a total return of 14.0% compared to the S&P Global Infrastructure Index, which generated a total return of 14.4%.

Returns in the month of October were very good, with the Fund generating a total return of 3.7% while the benchmark generated a total return of 4.4%. Although slightly behind the index over the month, given the significant outperformance of the industrials sector driven by an improved takeover offer for Abertis Infraestructuras SA (now the second largest weighting in the index), investors should be generally pleased to have kept pace in a broadly-diversified fund.

Returns in October were also positively impacted by a weakening CAD versus the USD. As we had suggested in prior commentary, modelling indicated that some of the recent Canadian dollar strength was unwarranted and was likely to reverse, which played out in October to our benefit.

Top contributors to the year-to-date performance of the Sprott Global Infrastructure Fund included Vinci (+114 bps), Visa (+111 bps) and Atlantia (+110 bps). Top detractors year-to-date included PG&E (-70 bps), Macquarie Infrastructure (-50 bps) and Keyera (-39 bps). Note that we have eliminated our positions in both PG&E and Macquarie due to stock-specific factors that led to the disappointing performance.

In our last commentary, we discussed our position in Atlantia, a large Italian infrastructure holding company that manages approximately 51% of Italy’s toll roads and operates the ADR (Italy) and ACA (France) Airport Systems. Atlantia had made a voluntary tender offer for the entire issued share capital base of Abertis, its Spanish toll road rival at a bid price of €16.50 per share or alternative consideration of 0.697 ATL shares limited to a maximum of 23% of the total outstanding shares of ABE. Although we were supportive of the transaction, we suspected that a competing bid could materialize. Given the exceptional run in the stock since the Italian referendum, up 33% from December 4, 2016 to October 31, 2017 in local currency terms, we trimmed a portion of our holdings.

On October 18th, our suspicions were confirmed when Hochtief (the German construction and construction-related services provider that happens to be 72% held by ACS, one of Spain’s largest engineering and contracting groups) announced a cash offer of €18.76 per share of Abertis or alternative consideration of 0.1281 Hochtief shares. We are watching developments closely, with particular attention on Atlantia’s willingness to increase its tender offer in order to gain geographic diversification and generate dividend growth irrespective of valuation and may adjust our position accordingly.

The Sprott Global Infrastructure Fund was concentrated in 29 positions as at October 31, 2017 with the top 10 holdings accounting for approximately 40% of the fund. Over the past year, 22 out of our 29 holdings have announced a dividend increase, with an average hike of 13.3%. Using a total infrastructure approach, we will continue to apply a disciplined investment process, balancing valuation, growth and yield in an effort to generate solid risk-adjusted returns.

 

Jeffrey Sayer, CFA

 

1 All returns and fund details are a) based on Series F units; b) net of fees; c) annualized if period is greater than one year; d) as at October 31, 2017; e) 2011 annual returns are from 09/01/11 to 12/31/11. The index is 100% MSCI World Core Infrastructure NR (CAD) and is computed by Ninepoint Partners LP based on publicly available index information.

The Fund is generally exposed to the following risks. See the prospectus of the Fund for a description of these risks: capital depletion risk; concentration risk; credit risk; currency risk; cybersecurity risk; derivatives risk; exchange traded funds risk; foreign investment risk; income trust risk; inflation risk; interest rate risk; liquidity risk; market risk; regulatory risk; series risk; short selling risk; small company risk; specific issuer risk; tax risk.

Ninepoint Partners LP is the investment manager to the Ninepoint Funds (collectively, the “Funds”). Commissions, trailing commissions, management fees, performance fees (if any), other charges and expenses all may be associated with mutual fund investments. Please read the prospectus carefully before investing. The indicated rate of return for series F units of the Fund for the period ended October 31, 2017 is based on the historical annual compounded total return including changes in unit value and reinvestment of all distributions and does not take into account sales, redemption, distribution or optional charges or income taxes payable by any unitholder that would have reduced returns.  Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. The information contained herein does not constitute an offer or solicitation by anyone in the United States or in any other jurisdiction in which such an offer or solicitation is not authorized or to any person to whom it is unlawful to make such an offer or solicitation. Prospective investors who are not resident in Canada should contact their financial advisor to determine whether securities of the Fund may be lawfully sold in their jurisdiction.

The opinions, estimates and projections (“information”) contained within this report are solely those of Ninepoint Partners LP and are subject to change without notice. Ninepoint Partners makes every effort to ensure that the information has been derived from sources believed to be reliable and accurate. However, Ninepoint Partners assumes no responsibility for any losses or damages, whether direct or indirect, which arise out of the use of this information. Ninepoint Partners is not under any obligation to update or keep current the information contained herein. The information should not be regarded by recipients as a substitute for the exercise of their own judgment. Please contact your own personal advisor on your particular circumstances. Views expressed regarding a particular company, security, industry or market sector should not be considered an indication of trading intent of any investment funds managed by Ninepoint Partners. Any reference to a particular company is for illustrative purposes only and should not to be considered as investment advice or a recommendation to buy or sell nor should it be considered as an indication of how the portfolio of any investment fund managed by Ninepoint Partners is or will be invested. Ninepoint Partners LP and/or its affiliates may collectively beneficially own/control 1% or more of any class of the equity securities of the issuers mentioned in this report. Ninepoint Partners LP and/or its affiliates may hold short position in any class of the equity securities of the issuers mentioned in this report. During the preceding 12 months, Ninepoint Partners LP and/or its affiliates may have received remuneration other than normal course investment advisory or trade execution services from the issuers mentioned in this report.

Ninepoint Partners LP: Toll Free: 1.866.299.9906. DEALER SERVICES: CIBC Mellon GSSC Record Keeping Services: Toll Free: 1.877.358.0540

Investment Team

Historical Commentary

2023
2022
2021
2020
2019
2018
2017