By Jennifer Ablan
NEW YORK (Reuters) - Investors poured an estimated $316.6 million into infrastructure-focused U.S. mutual funds and exchange-traded funds in May, according to preliminary data by fund-tracker Morningstar Inc. on Wednesday, extending a monthly inflow streak since the presidential victory of Donald Trump.
The latest figures suggested investors were warming to the president's budget proposal, unveiled last week, which calls for $200 billion in federal infrastructure funds with hopes to leverage $800 billion more in private and state government investments.
Investment firms including BlackRock Inc (NYSE:BLK), the world's largest asset manager with $5.4 trillion in assets under management, Blackstone (NYSE:BX) Group LP, the world's biggest private equity manager, and Jeffrey Gundlach's DoubleLine Capital have been active in the sector.
BlackRock has been building up its infrastructure unit, started in 2011. It works on public-private partnerships globally, and on complex endeavors that can range from wind farms to transportation projects, financed by equity or debt.
Last week, BlackRock announced the creation of a $280 million infrastructure debt fund that will be focused on highways and other infrastructure projects in Colombia.
For its part, the $450 million DoubleLine Infrastructure Income actively invests in three sectors of infrastructure credit: corporate bonds, structured product (also known as asset-backed securities) and project bonds. It is the only taxable bond mutual fund for investors who want to invest in non-municipal infrastructure credit, a space otherwise dominated by insurance companies and other institutional creditors.
Infrastructure debt finances projects, assets or companies that provide essential services in strategic sectors of the economy. Investments can include debt that finances airports, toll roads, power plants and renewable energy. It can also include investments secured by infrastructure-related assets, such as aircraft, rolling stock and telecom towers.
"Infrastructure debt is a surrogate for investment-grade corporate bonds," Gundlach said in a telephone interview. "These are vastly more secured with assets pledge to them and all are investment-grade rated and dollar-denominated. I consider them much safer and they yield more and have shorter duration."
Overall, institutional investors have historically invested in infrastructure mostly through private equity. Infrastructure debt, however, is a nascent investment opportunity that has arisen over the past several years due to increasing regulatory constraints on infrastructure lending (such as Basel III), said Damien Contes and Andrew Hsu, who oversee the DoubleLine Infrastructure Income Fund.
So far this year ended May 30, DoubleLine Infrastructure Income has posted returns of 3.66 percent, surpassing 95 percent of its category group.