‘I turn the M40 into cash for investors’

Inflation is officially back, and by the end of this year is expected to hit 2.3pc, above the Bank of England’s 2pc target. In a world of rising prices, investors need exposure to assets that can keep pace. Investing in infrastructure projects – such as motorways, schools or hospitals – that produce inflation-linked revenues is one way to protect your capital and income.

The problem for investors is that those assets come at a price. Almost all of the listed investment trusts specialising in infrastructure are at double-digit premiums, meaning they are trading far higher than the underlying value of their assets.

Andrew Charlesworth, manager of the £1.2bn John Laing Infrastructure trust, which currently yields 5.1pc, says investors should not worry about buying at a premium. He also explains how he made 36pc on a London hospital and his role in Donald Trump’s plans.

How do you run the trust?

The fund was spun out of John Laing, the 170-year-old construction business, in 2010. By the financial crisis the company had become completely involved in private finance initiatives [PFI projects, where public infrastructure projects are funded by private capital] but it couldn’t raise much cash. There was a large portfolio of high-quality, government-backed schemes and the firm sold 19 of these to the newly created fund.

The target for the fund is low-risk, government-backed infrastructure with inflation-linked returns. It’s the lowest-risk part of the sector and we tend to focus on hospitals, schools, railways and roads.

The key idea is focusing on assets where we get paid regardless of how much they are used. This means it doesn’t matter how many patients are at the hospital or how many people drive on the motorway.

We’ve grown from those 19 initial projects to 62 and we invest globally. Currently about two thirds of our portfolio is invested in British projects with the rest split between Europe and North America. Among our biggest projects are contracts to run many of Barcelona’s metro stations, the Forth Valley Royal Hospital and the M40 motorway.

The trust is at a 15pc premium. Is that price too high for investors to pay?

We trade at a significant premium and we have done since launch. Some retail investors feel that goes against the grain because of how they normally approach investment trusts.

The difference is that compared with a fund investing in shares it is much slower and harder to trade our assets. It will take at least two months to sell a project, so it is not as straightforward to value it.

What’s been your best investment?

We sold two projects last year – a hospital in Newham, east London, and a school in Barnsley, Yorkshire. We owned the school for 18 months and the hospital for five years, and achieved a 36pc uplift on the value of those. That was a hell of a result.

An infrastructure fund manager tells Sam Brodbeck how he is helping Donald Trump with a trillion-dollar plan

Donald Trump wants to spend $1 trillion on infrastructure projects. Will you be tilting the fund towards America?

I’ve been fairly closely involved with this for the past few months. I’ve been working on the Blueprint 2025 programme, an infrastructure plan for the next administration.

The exciting thing is that has now effectively been subsumed into the White House’s infrastructure plan; they adopted 16 of the 19 recommendations that we made. Ultimately they are seeking to use a substantial part of private finance to deliver the $1 trillion plan.

We have one project in the US at the moment; that will increase. The British Government hasn’t been using PFI for the past few years, so the opportunities for new privately financed public projects looks thin over here, whereas in the US there’s huge expectation of enormous projects funded privately, which is exactly what we do.

Do you have your own money invested in the fund?

A significant amount of my wealth is in the trust and it is a very large part of my Isa portfolio. The fund is very much focused on income, so owning it in an Isa or Sipp is much more tax-effective.

What would you be if you weren’t a fund manager?

I’m a civil engineer by training. When I was a teenager I very nearly became a professional sailor.

www.telegraph.co.uk/funds