Infrastructure

Portfolio Highlights
  • Essential Services
    Infrastructure assets are a critical foundation of modern economic and social development. Sustainable growth of the global economy is impossible without healthy energy, communication, water, waste, and transportation infrastructure, as well as those enabling companies that provide the products and services that maintain and improve these assets.
  • Inelastic Demand
    The need for clean water, reliable power and communication is largely inelastic. Regardless of economic conditions, demand remains relatively stable. Infrastructure assets generally generate cash flows over a long time horizon. As a result, they can produce an equitable return in the present along with the potential for inflation-offsetting fee and cash flow growth over time.
  • Income
    A high level of current income and consistent growth of income have historically been hallmarks of infrastructure investments. Like bonds, infrastructure can provide income that is visible and stable over the long term. Unlike fixed-income bonds, infrastructure can provide income that grows.
Portfolio Overview

Miller/Howard's Infrastructure provides both rising income and growth, and seeks to participate in the stability and dynamic growth of essential services and infrastructure worldwide. The stability arises from the fact that utilities and infrastructure are in constant demand and continuously generating revenues. The growth is due to expanding populations and demographic shifts that drive more usage. In the developing world, growth arises as economies push toward a developed-world standard of living.

Investment Philosophy

Global utility and infrastructure assets provide the framework for economic growth and social development. They are the core and the essence of a modern economy. Growth of the global economy and markets is dependent on the services they provide. Many studies show that we are at the beginning of the largest wave of investment in real productive assets the world has ever seen. We believe utilities that should consistently generate rising revenues and rising dividends are those that are high-quality, low-cost producers; serve territories with a favorable competitive environment; and conservatively exploit new opportunities.

Portfolio Objective

Our objective is to offer opportunistic growth potential combined with high and stable cash-flow yield with a portfolio that is not highly correlated to the broad equity market. The goal is to provide investors with a current stream of income, growth of income, and growth of the underlying principal.

Portfolio Strategy

We focus on opportunities in the utility industry, infrastructure operators, and enabling companies that do not necessarily operate infrastructure assets but contribute to their creation and ongoing activities. All companies must be listed on the US exchanges (ADRs and dual-listed stocks included). In addition, our portfolio is actively monitored for ESG (environmental, social, and governance) principles. Our emphasis is on the entire supply chain of the basic essential services, including electricity, gas, water, waste, midstream energy, telecommunication, data, and transportation.

Portfolio holdings comprise companies that we evaluate as financially sound based on strong balance sheets and high-quality debt ratings, and are characterized by dynamic diversity within essential services and their supply chain. Global exposure is provided through exchange-traded ADRs (American Depository Receipts).

In addition to high financial strength, a low dividend payout ratio, and a history of dividend increases (for traditional utilities), a company should offer a congenial regulatory environment, a sound competitive business position, growth demographics, and an absence of visible risk.

Strategy Inception Date: September 1991
Portfolio Manager: MHI Investment Team

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