First State’s Peter Meany has set his sights on indirectly accessing the US shale revolution by upping his exposure to Canada, the infrastructure expert has said.
In the most recent update for his €963 million First State Global Listed Infrastructure fund, Meany said tweaks to his strategy in December centred on Canada.
While continuing to hold an underweight to the country – 1.6 percentage points below the index – he has begun tactically adding to his bets here.
‘The best performing stock in the fund this month was Canadian energy pipeline company Pembina Pipeline Corporation,’ he said, which is a 4.1% position in the fund.
‘It is proceeding with a $2 billion pipeline expansion joining the company’s two existing pipeline systems in British Columbia and Alberta.’
The strength of developments in Canada, Meany said, reflect the changing landscape in its southern neighbour, where the onset of the so-called ‘shale revolution’ is starting to have huge knock-on effects for infrastructure.
Therefore, Meany said his only portfolio activity over the past month was to up his exposure to Canadian companies likely to benefit from future developments in the shale industry.
'We purchased a position in Canada’s second largest energy pipeline company, TransCanada Corporation. This company offers low risk expansion opportunities driven by the changing supply and demand dynamics of the North American oil and gas markets.'
While also looking at recovery-based plays, as he previously mentioned to Citywire, Meany said he is also confident over the strong cash flows being generated by infrastructure companies.
'Many companies’ balance sheets are currently strong enough to support share buy-backs, particularly companies in industries with limited scope for consolidation,’ he said. ‘Union Pacific recently announced that it intends to buy back 13% of its outstanding shares.'
'Further, buoyant equity markets and the low cost of debt are likely to encourage corporate restructuring. Asset sales, spin-offs and IPOs should present attractive investment opportunities, driving continued growth for this expanding asset class.’
The First State Global Listed Infrastructure fund has returned 75.9% over the five years to the end of December 2013. This compares to a rise of 67.51% by its Citywire benchmark, the UBS Global Infrastructure & Utilities 50-50 TR USD, over the same period.