UTF: Cheap Way to Invest in Global Infrastructure

Cohen and Steers Infrastructure Fund (ticker:UTF) is selling at an attractive discount to NAV and is an attractive way to invest in global infrastructure companies- utilities, pipelines, toll roads, railroads, airports, ports etc. The fund is well diversified and owns 150 securities. A managed quarterly distribution of $0.24 a share has been paid over the last year equivalent to about a 6% distribution yield. The distributions have included $0.032 return of capital.

On January 1, 2010, UTF changed its name from “Cohen and Steers Select Utility Fund” to “Cohen and Steers Infrastructure Fund”, at the same time changing its mandate to invest at least 80% of its managed assets in securities issued by infrastructure companies and its benchmark to the UBS Global 50/50 Infrastructure and Utilities Index.

The fund uses leverage to enhance its yield. Leverage represents about 37% of managed assets. It has access to variable rate debt of 1.3%, but then uses interest rate swap transactions to convert part of this into fixed rate debt. They have locked in 41% of their borrowings at an average fixed rate of 3.4% for three more years. Locking in a significant portion of the Fund’s leverage cost protects the dividend paying ability of the fund and offers some protection from future increases in short term interest rates.

Here are some recent stats on UTF:

Ticker:UTF   Cohen and Steers Infrastructure Fund

  • Total Net Assets= 1.2 Billion
  • Expense ratio= 1.04%      Common Share Expense Ratio: 1.68%       
  • Discount to NAV= -13.32%
  • Distribution rate: 6.28% (quarterly dividends)
  • Leverage: 37%
  • Turnover Ratio: 113% (annualized)

Full Disclosure: Long UTF.

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2 responses to “UTF: Cheap Way to Invest in Global Infrastructure

  1. Closed-end_Trader

    Although I usually agree with your picks, your timing on this one could be better. On 3/16/10 there was a merger of RTU into UTF. Prior to the merger there was a 6% spread. Now the arbiteues will be agressively selling UTF to unwind their positions. It was difficult to borrow shares to short UTF prior to the merger, and if possible, the borrow indicative rate was over 40%. The spread even one day prior to the merger was 2%. Prior to the merger on 3/15 the discount was 11.12. after the merger the discount increased to 12.45, 13.32, 13.26 on next 3 days. If the discount widens to 15-16% the 1 year low it would again be time to accumulate shares in my opinion. Consider MGU Macquare Glb Infrasture fund at a 16.2% discount as an alternative. Note: I held a long position in RTU prior to the merger and have completely liqudated my position in UTF after the conversion. I have no position in MGU.

  2. Hi Closedendtrader:
    You may be right that the discount will widen even more. There may be other holders of RTU that still want to sell UTF.
    But last month (Feb 25) the UTF discount was only 9.64%, so it has already widened by four percent. If the discount widens even more, I would add to my position.
    MGU looks decent, but traditionally sells at a wider discount to NAV than UTF (it has a lower distribution rate). The discount was over 17% just a few weeks ago, and may be a good buy if it reaches those levels again.

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