Brookfield Global Listed Infrastructure Income Fund: Potential for Diversified Protection in Volatile Markets

Stock investors have experienced rising volatility levels since the summer, and this has generated new rounds of analysis which suggests that equities markets have become overvalued. This has been true in the technology sector, where companies like Apple AAPL, Amazon AMZN, and Facebook FB have witnessed substantial declines after posting all-time highs earlier in the year. Global trade tensions and the prospect of tighter interest rate policy at the Federal Reserve have weighed on stocks, and reversed many of the gains posted earlier this year.

Ultimately, this means long-term investors must adopt proactive strategies in order to more effectively manage their positions. Closed-end funds may offer some interesting opportunities in these types of environments because they often trade at substantial discounts relative to net asset value. One name which is currently trading at attractive valuations relative to its historical averages, is Brookfield Global Listed Infrastructure Income Fund INF.

The Brookfield Global Listed Infrastructure Income Fund is a well-diversified instrument with assets allocated across major sectors within the global listed infrastructure universe. The Fund seeks to provide a high level of total return, with an emphasis on income, typically investing at least 80% of its net assets in publicly traded equity securities of infrastructure companies.

As of September 30, 2018, Master Limited Partnerships (MLPs) currently represent the largest sector for the Fund and Utilities currently make up the majority of the Fund at 21.2%, followed by Toll Roads (15.4%), Pipelines (13.1%), Renewables/Electric Generation (12.2%), Electricity Transmission & Distribution (10.4%), Communications (7.3%), Midstream (7.0%), Airports (4.6%), Water (4.3%) and Gas Utilities (2.8%). This high level of asset diversification may help investors ensure greater protection from potential market declines in any individual industry.

Further evidence of potential protective diversification can be found in the Fund’s regional exposure as of September 30, 2018. A majority of the holdings in the Brookfield Global Listed Infrastructure Income Fund are centered in the United States (at 56.7%). Companies in developed European nations are second in defining the Fund’s regional exposure (at 17.2%).

Finally, companies in Canada (9.5%), the United Kingdom (7.4%), Asia Pacific (6.9%), and Latin America (1.0%) comprise the remainder. For conservative investors, this added regional diversification remains critically important given the potentially disruptive nature of global trade tensions in the current market environment.

Drivers of growth within the Fund can be found in its individual stock holdings, which combine to create a potentially sound portfolio for investors. As of September 30, 2018, concessions and construction company Vinci SA VCISY represented its largest holding (at 5.6% of the Fund). Communications company, American Tower Corp. AMT was the Fund’s second-largest holding (at 5.3%), followed by Energy Transfer Partners LP at 5.1%.

As of November 30, 2018, Brookfield Global Listed Infrastructure Income Fund was trading at a 17.1% discount relative to its net asset value ($13.51). This is a valuation discount which has not been seen since April 2018. In the chart above, we can see that the last time INF traded near its 52-week lows, the Fund quickly reversed its prior declines to post sharp rallies of 15.72% (to reach the August 9th highs of $12.96 per share).

From a longer-term perspective, we can actually see that the Fund has not traded at NAV discounts this deep since 2016. On a YTD basis, the Brookfield Global Listed Infrastructure Income Fund is trading below its average NAV discount (13.71%). This is another factor which suggests the Fund may be in a position to produce gains for investors heading into the final months of the year.

In this chart, we can see that the Brookfield Global Listed Infrastructure Income Fund is also trading at a significant discount relative to its category averages. These trends have been relatively stark since 2017, and this suggests that INF is one of the most undervalued Fund offerings which can be found within the sector. Based on the September 30, 2018, market price, Brookfield Global Listed Infrastructure Income Fund reflected a total distribution rate of 8.16%. For investors, this may create potential for income as the Fund’s distribution level is currently far higher than the 1.91% dividend yield which is typically associated with the S&P 500 averages.

All combined, the Brookfield Global Listed Infrastructure Income Fund offers potential for well-diversified protection for investors in during volatile markets. The Fund provides elevated distribution levels and broad exposure to the global industrial listed universe which provides added security in the event that any specific geographical region or industry group experiences bearish declines.

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