Brookfield Global Listed Infrastructure Income Fund Looks Attractive in Yield-Starved Environment

Toward the end of 2018, rising volatility in stocks and continued interest rate increases from the Federal Reserve acted in combination to spook investors and send markets lower. In the fourth quarter alone, valuations in the S&P 500 experienced declines of -7.57% and this put pressure on the core holdings of many investors.

More recently, however, the Fed has altered its tone and signalled an end to an era of extended monetary tightening. This suggests upside potential for stocks trading at weakened valuations, and the changing macro landscape could place certain assets at the forefront in cases where investors are seeking yield in what is still a low-interest rate environment. One name to watch is the Brookfield Global Listed Infrastructure Income Fund, Inc. INF, which invests in publicly-traded infrastructure companies and has the potential to offer attractive income opportunities.

Closing Tone of 2018: Closed-End Funds Hit Hard

In the fourth-quarter of 2018, many closed-end funds fell victim to the market sell-off and the Brookfield Global Listed Infrastructure Income Fund was no exception. The Fund fell -13.74% (on a market price basis) during the period (after dropping below the $10 level), and its discount to net asset value (NAV) widened. Some of this pressure may have come as the result of tax-loss selling but valuations have already shown signs of a turnaround in 2019 (with the Fund posting YTD gains of 15.50%) (as of January 31, 2019, Source Bloomberg).

Managed by Brookfield Public Securities Group LLC, the Fund focuses most of its investment resources in the U.S. but maintains additional asset exposure in foreign markets. This endeavors to achieve an improved diversification profile and may shield investors from some of the recent turbulence generated as a result of continued trade tensions between the U.S. and China. The Fund is also characterized by leverage levels with the potential to optimize returns and limit risk potential for long-term investors.

(Yahoo Finance)

The Brookfield Global Listed Infrastructure Income Fund provides investors with access to infrastructure equities. The Manager, Brookfield Public Securities Group LLC, is a wholly-owned subsidiary of Brookfield Asset Management (which is a global-leading asset manager with approximately $330 billion in assets under management as of September 30, 2018). The Fund focuses largely on the infrastructure sector, which has the potential to provide protection in a down-market, compared to traditional global equities.

The Fund declined -15.01% (on a market price basis) in calendar year 2018. But with its distribution yield of 9.68% (as of December 31, 2018), income-oriented investors may gravitate toward its offerings this year, given the low-yield environment which continues to characterize markets. Moreover, the Fund’s discount to net asset value currently stands at 15.66%, as of February 1, 2019. This is below the 52-week average (11.86%), and wide relative to many comparative closed-end funds traded in the U.S. Thus, a potential reversion to the mean can be considered as a source for differentiated returns as the current market rebound continues.

Exposure to the Infrastructure Sector: Delivering Key Benefits to Investors

A broad overview of the performance in the Fund’s individual asset sectors can give investors deeper insight into its future growth potential in 2019.Market trends in 2018 were not positive for the infrastructure sector, as the Dow Jones Brookfield Global Infrastructure Composite Index (DJBGICU) saw a decline of -10.22%. This performance followed gains of 9.27% in 2017, and these annualized differences suggest that the negative influences of global trade tensions have made themselves clear. It should also be understood that Brookfield has no involvement in the day-to-day management of the Dow Jones Brookfield Global Infrastructure Composite Index.

(Brookfield Public Securities Group LLC)

As of December 31, 2018, Master Limited Partnerships (MLPs) represent the largest sector (at 19.7%), followed by Renewables/Electric Generation (16.7%), Toll Roads (16%), Pipelines (12.9%), Electricity Transmission & Distribution (11.3%), and Communications (7.5%). This broad level of asset diversification has the potential to provide protection from market declines in any individual industry.

(Brookfield Public Securities Group LLC)

Digging deeper into the allocation, we can see stability through stock selection. The largest individual holdings in the Fund are Energy Transfer L.P. (NYSE: ET), Vinci SA (DG.PA), American Tower Corp. (NYSE: AMT), Enterprise Products Partners L.P. (NYSE: EPD), and Enbridge Inc (NYSE: ENB). Combined, these holdings comprise roughly 27.6% of the Fund and indicate sustainable sector diversification within the allocation. American Tower Corp. falls into the Communications sector, while Vinci SA is classified under the Toll Roads sector. Energy Transfer L.P. and Enterprise Products Partners L.P. are master limited partnerships, and their combined allocation of roughly 11.5% help place this sector category at the top of the allocation list within the Fund.

Broad Regional Exposure

The Brookfield Global Listed Infrastructure Income Fund’s expansive regional exposure is further potential for protective diversification within its holdings. The Fund’s majority holdings are centered in the United States (56.7%), followed by Continental Europe (17%), Canada (10%), and the United Kingdom (8.1%). How does a diversified regional exposure help the average investor? Considering the widening impact of global trade tensions, conventional wisdom tells us that it is better to have one’s holdings diversified across various regions. As trade tensions escalate between the U.S., China, and the Eurozone, a conservative investor may limit the impact of surprise events in any single region through broad exposure to global markets.

INF: Trading at Deep NAV Discounts

As of February 1, 2019, INF was trading at a 15.66% discount relative to its net asset value ($14.05). This indicates a wider NAV discount relative to its 52-week averages (14.40%), and a significant rebound from the 52-week highs (a NAV discount of 20.47%). Ultimately, this may suggest that the Brookfield Global Listed Infrastructure Income Fund could be trending in a favorable direction while still offering potential value to investors in increasingly unpredictable markets.

(Morningstar)

Another sought-after advantage which becomes obvious during times of heightened volatility in the stock market is an investment’s ability to produce income. Here, the Brookfield Global Listed Infrastructure Income Fund stands above many of its peers with a current annualized payout of $0.98, which represents a distribution rate of 8.27% (paid monthly). INF trades at a higher distribution rate relative to key selections in its peer group: Cohen & Steers Infrastructure Fund Inc (7.99%), Macquarie Global Infrastructure Total Return Fund (7.88%), and the Nuveen Preferred & Income Opportunities Fund (7.99%).

Additionally, the Brookfield Global Listed Infrastructure Income Fund trades at a lower price-to-book ratio (3.00) relative to these key selections in its peer group: Macquarie/First Trust Global Infrastructure/Utilities Dividend & Income Fund (3.28), the NexPoint Strategic Opportunities Fund (3.65), and the Voya Global Equity Dividend and Premium Opportunity Fund (3.25).

Forging Ahead Against the Backdrop of Global Growth

In 2019, analysts expect modest growth in the global economy, which may periodically be offset by periods of increased uncertainty relating to inflation, interest rates, and trade policy tensions. These stable trend expectations support the outlook for securities in the infrastructure sectors and may lead to a narrowing in the NAV discounts visible for many closed-end funds.

The Brookfield Global Listed Infrastructure Income Fund invests primarily in publicly traded equity securities of infrastructure companies across the globe. Brookfield Public Securities Group LLC has considerable expertise centering around these types of assets, and the current portfolio demonstrates this position with well-developed infrastructure exposure. With a strong management team in place, the Brookfield Global Listed Infrastructure Income Fund offers access to an undervalued section of the market (pipelines/midstream) and its distribution levels may continue to remain attractive for investors focused on income-producing areas of the market.


This article originally appeared on Dividend Investments, which aims to identify the best income stock opportunities in the market.