Investment trust analysts flag rate risk to booming infrastructure sector

Infrastructure trusts could face ‘haircuts' to NAV if rates rise and inflation assumptions are revised down, analysts have warned.

Infrastructure trusts have benefited from an increasing hunt for yield by investors since the Bank of England cut the base rate to a historically low 0.5%. Premiums on the ‘big six’ trusts – 3i, Bilfinger Berger, GCP, HICL, International Public Partnerships (IPP) and John Laing Infrastructure – have reached an average of 10.9%, according to Winterflood, with the sector issuing large amounts of new shares as a result.    Including renewable energy funds, the sector raised £1.8bn in 2013, with John Laing raising £277m and Bilfinger Berger doubling in size. However, with the UK econom...