Questor: This infrastructure fund is building itself back up

Fund manager Edward Hunt said three new investments had improved HICL’s ability to deliver income and capital growth.

He said the portfolio was split between high-yielding, mature PPP investments and younger projects of up to 48 years that could generate 7pc annual growth.

All this pleased Capital Gearing Trust, a defensive £1bn global portfolio also tipped by Questor, which lifted its small stake in HICL from £4.4m to £7.7m last year.

Co-manager Chris Clothier said Capital Gearing was positive on the sector and increased its holdings in infrastructure funds to 8pc from 6pc.

Mr Clothier said HICL could generate a return of 9pc a year even if the discount didn’t disappear, though he hoped the company would step up buybacks if it sold further assets.

“We think the board is increasingly focused on capital discipline which, one way or another, will be positive for shareholders,” he said.

Iain Scouller, an analyst at broker Stifel, agreed.

Despite inflation nearing the Bank’s 2pc target, having fallen from an 11pc peak 20 months ago, he believed gilt yields could stay above 4pc due to high government borrowing, forecast by the Office for Budget Responsibility to hit nearly 99pc of GDP next year.

Nevertheless, he rated HICL and other infrastructure funds a “buy”, including BBGI which we backed in April, saying their dividend yields offered an attractive margin over gilts, especially with their shares on wide discounts.

That’s a view we share.

Questor says: buy

Ticker: HICL.L

Share price: 121.80p

Gavin Lumsden is editor of Citywire’s Investment Trust Insider website 

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