Portfolio Manager Perspectives

Jeff Benjamin

Genworth CIO Tim Knepp: If you're looking for stability, infrastructure is the answer

Oct 22, 2009 @ 12:08 pm

By Jeff Benjamin

Global infrastructure investments could represent an opportunity at this stage of the stock market rally, according to Tim Knepp, chief investment officer of Genworth Financial Asset Management Inc., which has $7 billion under management.

“If you're stepping into equities now, infrastructure at the global level makes sense because it's an area that tends to have relatively stable cash flow, and also has some inflation protection,” he said.

Mr. Knepp is on board with a lot of money managers who remain concerned about the overall stability of the economy and the stock market, which is now up more than 60% from the March low point.

“We're proponents of tying in asset allocation with what's going on in the economy,” he said. “At this point, cyclicals like financials and consumer discretionary stocks have rallied the most, and that suggests to us that the appreciation in the equity markets has some very shaky legs.”

Without clear signs of an aggressive economic recovery, Mr. Knepp said it is not normal for cyclical stocks to be doing so well at this point.

“We've even seen some home builders and real estate stocks rally,” he said. “A lot of the sectors that have rallied so far, typically don't rally until we're out of the woods.”

Mr. Knepp said a good way to gain exposure to global infrastructure is through exchange-traded funds, including the SPDR FTSE/Macquarie Global Infrastructure 100 (GII) and iShares S&P Global Infrastructure Index (IGF).

The former offers exposure to a higher concentration of utility companies and is more heavily weighted in U.S. stocks.

The latter provides a more diversified profile of industrial companies and more emerging-markets exposure.

“The secular case for global infrastructure is quite good, and we view it as a safe play,” Mr. Knepp said. “We'd expect infrastructure to return at least inflation, plus 3% to 5%, and you also get a nice dividend yield that is typically about one and a half times that of the broader index.”

Portfolio Manager Perspectives are regular interviews with some of the most respected and influential fund managers in the investment industry. For more information, please visit InvestmentNews.com/pmperspectives .


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