{"id":10680,"date":"2025-07-21T10:56:12","date_gmt":"2025-07-21T10:56:12","guid":{"rendered":"https:\/\/www.newsbeep.com\/au\/10680\/"},"modified":"2025-07-21T10:56:12","modified_gmt":"2025-07-21T10:56:12","slug":"were-built-for-resilience-how-magellan-is-navigating-income-in-uncertain-times-tom-richardson","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/au\/10680\/","title":{"rendered":"\u201cWe\u2019re built for resilience\u201d: How Magellan is navigating income in uncertain times – Tom Richardson"},"content":{"rendered":"

With equity markets at all-time highs and rate cuts back on the table, it\u2019s a confusing time for income investors. But for Ofer Karliner<\/a>, Co-Portfolio Manager of the Magellan Infrastructure Fund, this environment plays directly to the strengths of the asset class.<\/p>\n

\u201cInfrastructure businesses have very robust cash flow and profound competitive advantages,\u201d Karliner explains.\u00a0<\/p>\n

\u201cThat means stability \u2013 and stability matters more than ever right now.\u201d<\/p>\n

In this wide-ranging Q&A for Livewire\u2019s 2025 Income Series, Karliner unpacks why infrastructure remains one of the most reliable sources of income, how the Magellan team is managing risk, and where he\u2019s seeing long-term value.<\/p>\n

Rates, resilience and the macro backdrop<\/p>\n

One of the most pressing questions for investors today is interest rates. With inflation cooling and central banks pivoting toward cuts, what does that mean for infrastructure?<\/p>\n

It\u2019s good news, says Karliner. But with caveats.<\/p>\n

\u201cThe market reacts to nominal rates, and falling rates are helpful. They mean lower debt costs and a lower discount rate.\u201d<\/p>\n

But he cautions that it\u2019s the reason behind the move that matters, not just the direction of rates. If rate cuts reflect economic weakness, infrastructure is still well-positioned.<\/p>\n

\u201cBecause these businesses are so stable, they tend to outperform in downturns,\u201d he says. \u201cYou get the benefit of falling rates and the protection of steady cash flows.\u201d<\/p>\n

Inflation protection built in<\/p>\n

Infrastructure also offers strong inflation protection. Firstly, through regulation and price-linked contracts, but also due to the very nature of the assets.<\/p>\n

\u201cTolls go up, but debt is generally fixed,\u201d Karliner notes. \u201cShort-term inflation spikes can actually be a net positive.\u201d<\/p>\n

The real risk, he adds, is when inflation becomes entrenched, pushing up real interest rates. But overall, the portfolio is well insulated from the most common inflationary shocks.<\/p>\n

Where Magellan is finding value<\/p>\n

One area where Magellan is leaning in is Europe. Despite global markets reaching record highs, Karliner believes many infrastructure names, especially in Europe, remain attractively priced.<\/p>\n

\u201cEurope was screamingly cheap at the start of the year. It\u2019s still cheap now,\u201d he says.<\/p>\n

Some of the UK\u2019s regulated utilities, such as water companies, continue to trade at discounts. And despite concerns around US valuations, Karliner sees that market as resilient in the long term. Though it may be overdue for a \u2018breather\u2019.<\/p>\n

\u201cUS exceptionalism was being talked up a lot last year,\u201d he says. \u201cThat kind of language sets off alarm bells for me.\u201d<\/p>\n

Structural growth tailwinds<\/p>\n

The fund is positioned for long-term growth as well as value. Karliner highlights several structural trends supporting infrastructure assets.<\/p>\n

\u201cPopulation growth, rising wealth, growing data usage, the energy transition \u2013 these are all powerful tailwinds,\u201d he says.<\/p>\n

More people means more toll road usage. A larger middle class means more air travel. The explosion in data consumption drives demand for mobile towers. And the global shift to renewables and growing power demand from data centres is creating a decades-long investment cycle in utilities.<\/p>\n

All of these trends, Karliner argues, add up to real and persistent earnings growth for infrastructure owners.<\/p>\n

Transurban (ASX: TCL<\/a>): the hidden upside in toll roads<\/p>\n

One standout name in the portfolio is Transurban, Australia\u2019s toll road giant. Karliner sees it as a near-perfect example of infrastructure\u2019s income potential.<\/p>\n

\u201cThey have an exceptional suite of assets with long-term contracts, inflation-linked tolls, and monopoly control,\u201d he says.<\/p>\n

In many cases, toll increases are either directly linked to CPI or subject to minimum annual thresholds of typically 4% or more. That pricing power helps drive consistent earnings, which in turn supports steady dividends.<\/p>\n

He also points to an often-overlooked feature of toll roads: \u201coption value.\u201d<\/p>\n

\u201cIf the government wants to do something that touches your toll road, for example to widen, expand, or integrate, they usually have to come to you,\u201d he explains. \u201cThat creates hidden upside.\u201d<\/p>\n

Why infrastructure works for income<\/p>\n

At its core, infrastructure is about cash flow. Most businesses in the fund operate as monopolies or oligopolies, protected by regulation or scale advantages. That means minimal competition, reliable revenues, and controlled costs.<\/p>\n

\u201cYou\u2019re not exposed to price wars. You\u2019re not vulnerable to economic whiplash,\u201d Karliner says.\u00a0<\/p>\n

\u201cThat translates to reliable income.\u201d<\/p>\n

Even in downturns, usage tends to be sticky. People still drive, fly, use their phones, and use electricity. That stability gives infrastructure funds confidence in their income streams and in their ability to deliver for investors.<\/p>\n

A personal perspective on risk<\/p>\n

In a lighter moment, Karliner is asked about the riskiest thing he\u2019s ever done outside of investing. His answer?<\/p>\n

\u201cI went rock climbing in Greece with random people I met at a hostel \u2013 no safety gear. I caused a small rockslide and still have a dent in my shin.\u201d<\/p>\n

It\u2019s a reminder that while infrastructure investing might not be thrilling, it\u2019s precisely that lack of drama that makes it so valuable in today\u2019s uncertain markets.<\/p>\n

Invest in the world’s best businesses<\/p>\n

The Magellan Infrastructure Fund holds 20 to 40 stocks that seeks to deliver the stable returns offered by the asset class, while hedging returns from currency movements. Learn more by visiting the Magellan website<\/a> or fund profiles below. <\/p>\n


\n<\/p>\n

ETF<\/p>\n

Magellan Infrastructure Fund (Currency Hedged) (Managed Fund) (MICH)<\/p>\n

Global Property<\/p>\n

<\/a>
\n<\/p>\n

Managed Fund<\/p>\n

Magellan Infrastructure Fund<\/p>\n

<\/a><\/p>\n

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