Three investment ‘gems’ you won’t find in a typical managed portfolio

Investor AB is a Swedish listed investment company (as mentioned above, akin to a UK investment trust) founded by the Wallenberg family – one of the oldest and most powerful industrial dynasties in Europe.

The company has a market cap of £70.5 billion (March 2025) and invests in a concentrated portfolio of listed and private companies. It uses the Wallenbergs’ own distinct brand of ‘Quality’ investing, acquiring large stakes in companies they believe have outstanding potential.

Investor AB takes an active ownership role – including via seats on the board – to help its companies succeed. Holdings include Atlas Copco, the maker of various industrial tools, air compressors, and valves, and AstraZeneca. Investor AB retains a stake in EQT AB, a firm it founded in 1994. Using the same philosophy, EQT has grown to become the world’s third-largest Private Equity firm.

Investor AB’s clearly defined strategy has been highly successful over the long term. In the 25 years to March 2025, average returns were 12.7% per annum – compared to 5.3% for the average global equity fund. Past performance is not a guide to the future.

As a hypothetical example, if you’d invested £10,000 in Investor AB back in early 2000, this stake could be worth around £200,000 today. By comparison, a similar investment in the average global equity fund might only be worth £36,000 or so (see chart). The chart below is for illustrative purposes only.

For investors seeking better risk-adjusted returns for their portfolio, it may make sense to look beyond equities.

One potentially appealing asset class few investors have exposure to is Private Infrastructure. Private Infrastructure could offer several possible benefits, alongside specific risks.

• Lower market correlation: Infrastructure assets have low correlation with stocks and this could add diversification to an investment portfolio. Although, due to their long-term nature, these assets can be sensitive to changes in interest rates.
• Lower volatility: Essential services like utilities often have stable and non-cyclical demand profiles, helping to dampen the overall volatility of returns. That said, investors should be mindful of the underlying asset quality and the extent to which debt is used to enhance returns. These factors could exacerbate volatility.
• Potential for inflation proofing: Infrastructure assets are in many cases highly regulated, with steady, long-term, contracted revenues that are indexed to inflation. However, due to their strategic importance, in a few countries or jurisdictions there may be a risk of political interference – or even outright nationalisation.

Brookfield Infrastructure Partners is a good case in point, in our view. It invests alongside its manager, Brookfield Asset Management, to acquire and operate assets that are vital to the global economy. These include shipping containers, gas pipelines, hyperscale data centres, semiconductor foundries and so on.

With over $1 trillion under management and more than 250,000 operating employees, Brookfield’s vast scale and operating experience gives it an enviable advantage when it comes to sourcing, acquiring and adding value to infrastructure assets.

Brookfield Infrastructure Partners has delivered impressive dividend growth over time. Dividends rose from $0.88 per share in 2008 to $4.05 in 2024 (see chart - adjusted for share splits), although past performance is not a guide to the future. Today, the company has a dividend yield of 4.7%, with target growth of 6-9% per annum – dividends are not guaranteed.

The combination of a rising dividend and additional capital growth from selling assets has also delivered strong returns for investors in Brookfield Infrastructure Partners over the period (see chart – past performance is not a guide to the future).

Another asset class that doesn’t feature in a typical managed portfolio is Private Equity.

Private Equity as a whole is worth over $5 trillion. Of the 159,000 companies globally with revenues of at least $100 million, 140,000 (or 88%) are privately owned.

Moreover, Private Equity has significantly outperformed public stock markets over the past 30 years, although that is not a guide to the future.  

An example of a Private Equity investment held within our service is Hg Capital Trust – an investment trust managed by Hg, one of the world’s most successful Private Equity firms. Hg invests in companies providing mission-critical software and services, which tend to be highly scalable, resilient to downturns and generate recurring revenue.

Private Equity firms like Hg take a far more active approach to their portfolio companies than many managers who invest in public equities. Hg has a large investment team with deep sector expertise. They’ve backed more than 200 software businesses to date and know how to unlock new sources of value for shareholders.

This well-defined approach has to date paid off handsomely. Over the past 30 years, Hg has delivered returns to investors of around 16% per annum (see chart). Past performance is not a guide to the future.