Funds such as John Laing Infrastructure and the equivalent managed by 3i are safe investments that take positions in projects with guaranteed long-term income and recycle this to shareholders to offer an attractive dividend yield.
There is not a lot that can go wrong. For investors seeking an even more reliable investment, though, there is GCP Infrastructure Investments. This provides debt to projects that have the support of the public sector. This means that in the wildly unlikely event that the project should get into trouble, GCP ranks ahead of the owners of equity in it in terms of getting their money back.
This really is a belt and braces approach. Other infrastructure funds have shifted their focus overseas because of a shortage of potential investments in the UK, given how much demand there is for such assets. GCP strictly adheres to its investment policy, believing that such overseas purchases should be only by those with the right expertise.
It is a creation of the financial crisis, run by Gravis, the fund manager (formerly Gravis Capital Partners, hence the name), and put together at a time when the banks were fighting shy of providing long-term debt to even the safest of projects. A couple of years ago Gravis put together GCP Asset Backed Income Fund to invest in debt in non-public sector assets, rather than dilute the existing fund’s thesis. There is also GCP Student Living, which provides student accommodation. The debt that GCP Infrastructure holds in PPP or PFI projects, clean energy and increasingly in social housing returns 8.7 per cent. Out of this, the fund pays dividends that, at the present price, provide a 6 per cent yield.
Investors are asked each year to approve a programme of placings that will fund future investment, £260 million or so in the current year. This is efficient because shares can be issued as the money is needed, rather than in one go, which produces “cash drag” — poor returns from keeping it in the bank. Yesterday the first £50 million was issued from the present programme.
The shares, off 1½p at 126p, have kept pace with those other infrastructure funds. For ultra-cautious investors, GCP is as good as it gets.
My advice Buy
Why This is among the safer investments on the market, given the strategy of only holding debt in safe projects, and with an attractive yield
Banco Santander
Santander says that it is doing its best not to put its British investors at a disadvantage even if they cannot participate, for what the Spanish bank says are logistical reasons, in its €7.1 billion rights issue to fund the purchase of Banco Popular. This is a very cheap deal for Santander and could reap huge benefits and the shares are going out at €4.85, a significant discount to the present share price of €5.79.
So the 1.4 million UK investors, a legacy of Santander’s purchases of Abbey National in 2004 and Alliance & Leicester in 2008, will have their rights sold in the market and the cash returned to them, while there is a free dealing service if they wish to buy extra shares to stop their holdings being diluted.
Theoretically this should put them, as owners of approaching 3 per cent of the share capital, in the same place as the others who will be able to take advantage of the rights issue, as all things being equal the value of the rights should equal the discount to the price the shares are going out at.
Except that the Santander price could rise. The British investors have fairly small holdings worth between £500 and £1,000. Those who feel aggrieved enough about being shut out of the rights to sell will have to stump up the dealing fees.
They should consider switching from Santander to Lloyds Banking Group if they wish to remain invested in the sector. The Spanish bank yields about 3.8 per cent, which is the main reason for holding. Lloyds offers a forward yield of approaching 6 per cent.
My advice Sell
Why Aggrieved investors could always switch to Lloyds
Unite Group
For some reason Unite, Britain’s biggest quoted provider of student accommodation, gives valuations for its two joint ventures before publishing group results. These provide a useful snapshot of how the portfolio is doing in general. The progress is encouraging and Unite says that it is well on target for expected rental growth of 3 per cent to 3.5 per cent this year.
The ventures are London Student Accommodation, where Unite has a half-share with GIC, the Singapore sovereign wealth fund, and the Unite UK Student Accommodation Fund, where it has 23 per cent. In the spring the company put its £227 million purchase of Aston Student Village in Birmingham into London Student Accommodation, which had a 0.5 per cent rise in the value of its portfolio in the second quarter. The rise at UK Student was 0.9 per cent.
Unite is committed to adding 8,000 new beds by 2020 to its portfolio of about 50,000. This month the company will release its interim figures, which should show net assets per share of 660p or more, a slight premium to the share price, up 9½p at 649½p. Its core market can only continue to grow.
My advice Buy
Why Unite’s core market can only continue to grow
And finally...
There is an ambitious fundraising by TP Group, a small, Aim-listed engineer that until a couple of years ago used to be known as Corac. The company is raising £23.9 million, not much less than its £30 million market capitalisation. TP, which operates in defence, reckons to have identified more than 20 potential acquisitions and is in talks with about half. It is targeting revenues of between £90 million and £100 million by 2020 as a result, a sharp jump from the £21 million reported last year.
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