ClearBridge Investments’ real income fund, managed by Melbourne-based portfolio manager Andrew Chambers, oversees more than $6.7 billion in assets. The fund invests in rate-sensitive sectors such as property and infrastructure. While these sectors saw softer share prices in Australia from March to September due to inflationary pressures lifting interest rates and bond yields, underlying cash flows for real assets have shown notable resilience. This strength is underpinned by inflation-linked revenues, population growth, and rising construction costs constraining new supply, allowing most real asset stocks to maintain dividend growth.
Mr Chambers identified resilient companies including pipeline operator APA Group, benefiting from long-term, inflation-linked capacity contracts crucial for Australia’s energy security. Regulated assets like Aurizon’s rail network and Auckland Airport also demonstrate strength, with higher bond yields potentially influencing regulatory settings. ClearBridge strategically added to Australian retail real estate investment trusts and Transurban during recent share price weakness, funding these moves by trimming data centre REITs, industrial REITs, and North American rail holdings.
The increase in Australian retail REITs is supported by a strong leasing environment, rising replacement costs, and expanding retailer activity amid population growth. Transurban’s inflation-linked tolling and increased road capacity are set to bolster revenue and dividend growth. Mr Chambers also highlighted ASX-listed New Zealand utility Contact Energy, with its hydro and geothermal generation, as a promising stock with potential from growing data centre interest. AGL Energy is viewed as highly undervalued in the Australian market, trading at an attractive multiple. Despite near-term earnings headwinds, a positive medium-to-long-term outlook is expected, driven by repricing of legacy contracts and anticipated increases in long-term electricity prices.
