Russell Investments launches debut open-ended infra fund of funds

The Global Unlisted Infrastructure Fund will provide access to a multi-manager portfolio targeting a CPI plus 4% return.

A new multi-manager-focused vehicle launched last week as Russell Investments introduced The Global Unlisted Infrastructure Fund.

The open-ended fund of funds is an unusual addition to the infrastructure fund space, and also marks a departure from the company’s listed offerings. The vehicle aims to provide investors with exposure to a global infrastructure portfolio. The manager would not comment on how much money the fund has already raised.

The target return is G7-core CPI plus 4 percent. According to private markets portfolio manager Michael Steingold, this figure seemed low to clients only a short while ago. Now he’s asked if it’s not too high. He doesn’t think so: “We’re focused on assets which we believe can have a high degree of inflation pass-through.”

The fund is core-plus to accommodate a variety of risk profiles, from income-only super-core to more growth-focused and value-adding portfolios. This strategy, along with the very basis for the fund, was down to client input, Steingold tells Infrastructure Investor.

“We are client-led, and our clients appreciate infrastructure as an asset class. However, if they wanted to directly invest in a selection of open-ended funds, they would lose out on fee breaks. That’s why we came up with a fund structure that would provide both incremental liquidity and allow our clients to benefit from the size of their allocation into the asset class.”

“At the moment, investors may need more flexibility with regards to liquidity, and the open-ended structure makes it easier for clients both to deploy and divest,” says Steingold. He adds that the open-ended structure makes it easier and faster to adjust the fund’s allocations to sectors, geographies and other factors in response to changing market conditions.

Furthermore, Steingold believes that the open-ended structure is better for generating scale over time to achieve improved fees, governance rights and cost efficiencies.

Diversification is key

The targeted investments are OECD plus a few other geographies with high sovereign credit ratings to capture a risk premium where it exists. Renewable, digital and social investments will make up 65 percent of the portfolio, and most assets will be brownfield and operational.

Steingold emphasises the ability of the fund to provide exposure to a variety of asset sizes: “We will include everything from mid-market to very large investments, which will help us be diversified and catch relative value wherever it is.”

The Luxembourg-domiciled core-plus fund is currently only open to professional investors based in the UK. The fund is classified as Article 8 for SFDR purposes.