3 Alternative Assets for Income

Camilla Ritchie manager of the 7IM Sustainable Balance Fund gives her alternative picks for income investors

Emma Wall 16 October, 2017 | 9:50AM
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Emma Wall: Hello, and welcome to Morningstar. I'm Emma Wall and I'm joined today by Camilla Ritchie, Manager of the 7IM Sustainable Balance Fund, to give her three alternative picks for income.

Hello, Camilla.

Camilla Ritchie: Hello, Emma.

Wall: So, what's the first pick today?

Ritchie: My first pick is Civitas (CSH).

Wall: What does Civitas do?

Ritchie: It's in social housing. And it invests in social housing which has been built by, for instance, local authorities to house quite often young people who have social needs, which could include individuals who have mental illness. It's a step away from those big institutions of yesteryear putting people in smaller sort of houses in living with people sort of in a normal situation which is much better than the former.

And the company decided to set itself up because there was a need for local authorities to take the properties off their balance sheets. Often the balance sheets were getting very highly geared and local authorities weren't able to go out and build more of the social housing which is really, well, a requirement on them and a big need at the moment.

So, Civitas buys the properties from the local authority. Local authority then is able to get the money and go out and build more social housing. Civitas gets the income which comes oftentimes directly from the government or from the local authorities. So, it's a very good income play and it's very secure income.

Wall: And indeed, ticks that ESG box of the social?

Ritchie: Indeed.

Wall: And what's the second pick today?

Ritchie: The second pick is a wind and solar company called The Renewables Infrastructure Group (TRIG). It has both wind infrastructure assets and solar assets in the U.K. but also in Europe. And it is another income play. And again, it buys from somebody else who has done the development already. So, there's no development risk there.

So, it buys from the developer and the developer has already had the wind and solar fields accredited and therefore, the income that comes through is either through a subsidy agreement with the government or it is based on the wholesale energy price, but it's about sort of half and half.

Wall: So, part fixed, part flex?

Ritchie: Yeah.

Wall: And what's the third pick today?

Ritchie: And the third one is another fund with ESG credentials called RM Direct Lending (RMDL). And that lends to projects within the U.K. and it also has ESG written into its prospectus. So, the sort of lending it does is to – well, in fact, to wind and solar type projects at the development stage. But the good thing about this company which distinguishes it from peer-to-peer lending is that its lending is asset-backed. So, it takes a charge over the assets that it's lending – the company it's lending to, which makes it much more secure. And so, that is my third ESG pick.

Wall: Camilla, thank you very much.

Ritchie: Thank you.

Wall: This is Emma Wall for Morningstar. Thank you for watching.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Civitas Social Housing Ord  
Renewables Infrastructure Grp97.60 GBX0.51
RM Infrastructure Income Ord78.80 GBX2.60

About Author

Emma Wall  is former Senior International Editor for Morningstar

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