In this series of short profiles, we ask leading fund managers to defend their investment strategies, reveal their views on cryptocurrency, and tell us what they'd never buy.
This time our interviewee is Charles Hamieh, co-manager of the Morningstar 5-star rated ClearBridge Global Infrastructure Income Fund.
Which sector provides the biggest investment opportunity as we approach the end of 2021, and why?
Within infrastructure, we think there’s a need for balanced exposure as growth moderates and central banks tighten monetary policy. Transport stocks are attractive, benefiting from more traffic recovery and an easing in supply chain bottlenecks. Utilities have always been an important sector allocation. Most are very high-quality companies, with strong asset base growth, which translates into strong equity returns and healthy dividend growth.
What's the biggest economic risk right now?
There are many we’re watching, but the risk of a policy mistake looms large as inflation remains persistent. That said, we generally find little correlation between infrastructure asset class returns and inflation. The larger concern would be higher real interest rates paired with lower growth.
Describe your investment strategy.
We invest in global listed infrastructure companies, with a focus on both regulated assets (defensive, with higher income and low economic sensitivity, such as utilities, including renewables), and economically sensitive user-pays assets (more leveraged to GDP growth and with lower income, such as airport, toll roads and rail). We look to provide long-term inflation-linked capital growth over an economic cycle with a focus on reliable income.
Which famous investor or business icon do you look up to, and why?
To be honest, no single “famous” investor has really shaped my approach. I’ve intentionally been open minded and pragmatic as those are more important factors in investing well.
Some of my best lessons and insights are ones I’ve received from colleagues who have helped shape our investing, particularly within listed infrastructure.
Name your favourite forever stock(s)
No doubt it would be a very high quality tollroad, airport or utility. Over decades these assets have proven to be strong generators of long-term wealth.
What would you never invest in?
Any company where it was not immediately obvious what the link was between its business model and shareholder value. For many companies, this is much easier said than done. On a personal note, I would never invest in a business lacking a social license to operate Companies across all asset classes need to contribute to society moving forward.
Growth or value?
Investing is about generating long-term wealth, and preserving capital when markets are volatile, and compounding returns through a cycle. As such, I don’t like to define it as growth or value.
Pension or property?
It depends on what life stage you're at!
Cryptocurrency: Public enemy or pioneering proposal?
I was certainly a sceptic at first. And I still would be concerned about the risk of holding some of the more speculative cryptocurrencies. Increasingly though, like many, I can see a role for the more institutional grade cryptocurrencies as part of a balanced portfolio.
What can be done to increase diversity in fund management?
It is improving. Our aim is to create and foster a workplace that reflects and contributes to the diverse, global communities in which we do business. ClearBridge has a diversity and inclusion council whose primary goals are to achieve and sustain a workforce of qualified people that represent our global workforce and the communities it works in. It also advises the CEO on subjects related to diversity and inclusion.
Additionally, ClearBridge participates in pipeline recruitment and other external diversity initiatives in a bid to introduce college students from underrepresented backgrounds to the financial services industry. It’s also helpful to focus on mentoring, for example among women in leadership positions. For larger companies it can also be useful to track cohort data to make sure diverse hires are moving up through the ranks.
Give us an example of engaging with a company you invested in where you were particularly proud (or disappointed!) of the outcome?
Sydney Airport, which is Australia's largest airport, fell well below our view of fair value. However, as an active manager, our deep understanding of the underlying asset and strong engagement with company management gave us the confidence to position Sydney Airport as our largest holding.
During the second half of 2021, Sydney Airport came under bid by a consortium of Australian pension funds that led to a strong rally in the share price and highlighted the scarcity value of these assets. During this period, we regularly engaged with management to understand the company's approach to the offers and provide our investors with feedback.
What's the best bit of advice you’ve ever been given?
Be a pragmatic investor. As the world becomes more complicated--and as return expectations fall--one can’t necessarily approach investing anchored in the view that history will keep repeating itself. Having a long-dated approach to assessing assets and executing views in the listed markets is at the centre of that.
What would you do if you weren’t a fund a manager?
I'd be a pilot!
