The investment funds designed to be fireproof
SEQUOIA trees are huge, thickskinned and exceptionally resilient. Unlike virtually any other living thing, they can survive even the hottest wildfires.
Sequoia Economic Infrastructure
Income Fund is designed to emulate its namesake, particularly the tree’s defensive qualities.
The company invests in businesses across a range of industries and countries – from Welcome Break service stations in Britain to Scandline ferries in the Nordics to water and electricity firms in the US. Overall, there are 72 investments spread across Europe, North America, Australia and New Zealand.
The shares are £1.10 and should deliver solid growth over the coming years, supplemented by generous dividends. Only last month, Sequoia raised its annual target from 6p to 6.25p, so the shares now offer a healthy 5.7 per cent yield.
The company was set up in the wake of the financial crisis by four highly experienced managers who were determined to build a company that combined relatively low risk with relatively high returns.
Never an easy combination, the group has managed to pull it off so far, by doing immense amounts of research on each investment, discarding any that seem even remotely inappropriate and making sure that investments are really diverse. No investment accounts for more than 5 per cent of the entire portfolio and there are differences in size, type, sector and location.
Unlike many investment funds, Sequoia invests in companies’ debt – such as bonds and loans – rather than equity. If a business collapses, debt investors are repaid first, giving Sequoia shareholders a degree of comfort. Sequoia also focuses on infrastructure investments, which are backed by solid assets, including schools, sea and airports, wind farms, data centres and power stations.
The company owns bonds in Heathrow, for example, and, on the other side of the world, it has lent money to Hawaiki Cable, which builds underwater cables linking Australasia to the US West Coast.
Led by Randall Sandstrom, a former Rothschild banker and member of the US Army Special Forces, Sequoia floated in 2015 at £1. Back then, it was valued at £150million. Today, it is valued at more than £1billion. The group has raised money from the stock market several times to fund growth and is about to complete another fundraising, having identified several potential investments that should produce robust returns.
As Sequoia becomes larger and better known, its standing in the market increases, along with its access to the best transactions. The company has an impressive track record too, having invested in more than 100 businesses over the years, not one of which has ever defaulted on its debt.
MIDAS VERDICT: The word ‘fund’ may have acquired unwelcome connotations following the Woodford fiasco but Sequoia is a very different beast, in structure, approach and focus. At £1.10, the shares offer attractive long-term rewards – and a juicy dividend too.