A Strong Infrastructure Play
But Can The Industry Take Advantage Of Its Potential?
Every week, we’ll profile a high yield investment fund that typically offers an annualized distribution of 6-10% or more. With the S&P 500 yielding less than 2%, many investors find it difficult to achieve the portfolio income necessary to meet their needs and goals. This report is designed to help address those concerns.
With interest rates turning more volatile and the markets trying to figure out what the Fed is going to do, funds investing in rate-sensitive stocks have similarly turned volatile. They’re especially interested in where rates are going because it will heavily influence their cash flows, debt servicing costs and ability to reinvest back into the business in a cost-efficient way. That makes infrastructure and utility stocks especially vulnerable to changing conditions.
The Cohen & Steers Infrastructure Fund (UTF) is right in the crosshairs of current economic conditions. Its blended exposure to stocks & bonds and U.S. & global stocks means that there are a lot of macro factors impacting it all at once - cyclical growth, inflation, interest rates, currency & geopolitical risks. This could be a very interesting play though. If AI is going to be as revolutionary as it’s being made out to be and bitcoin/blockchain continue developing, the energy needed to support these efforts are going to need to come from somewhere.
Fund Background
UTF’s investment objective is total return with emphasis on income through investment in securities issued by infrastructure companies. These companies typically provide the physical framework that society requires to function on a daily basis and are defined as utilities, pipelines, toll roads, airports, railroads, marine ports, telecommunications companies and other infrastructure companies. UTF also uses leverage in order to enhance yield and total return potential.
As mentioned up top, UTF’s real benefit is its diversity. It’s one of the best all-inclusive infrastructure plays out there with its combination of stocks, bonds and preferreds from all around the world. Infrastructure is one of those things that we keep hearing a lot about, especially within the government, but it’s really been waiting for the right timing to take off. COVID shut down a lot of potential development. Since then, it’s been all about tech & growth, not the cyclical areas of the economy that would be moving this development forward. With AI, electric vehicles and clean energy, there are certainly catalysts in place for the next evolution of the infrastructure space, but existing debt loads and long lead times could make that challenging.
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