One to watch: Infrastructure Funds

Although there are signs UK interest rates will be rising before the autumn – belatedly, in my opinion – it is still difficult to identify a relatively safe haven for funds with the returns on cash so derisory.If we do see the adoption of a more orthodox monetary strategy, conventional bonds will have to adjust to higher yields. Index-linked securities have attractions but their absolute running yield is not particularly exciting.

There is, however, one class of equity that income-seeking investors could consider. Infrastructure funds include economic assets, such as transport and energy, and social assets, like schools and hospitals. As a result, they enjoy dependable cashflows generating reliable dividends. Different fund structures have to be taken into account, some not owning the underlying asset but buying what amounts to a long-term lease.

International Public Partnership operates largely under this modus operandi with both UK and overseas interests; these are quite a significant proportion of the portfolio's overall portfolio, with 18 per cent in Australia and 13 per cent in Belgium.

3i Infrastructure, on the other hand, has a one-third stake in Eversholt Rail Group, which runs about 30 per cent of the UK's rolling stock; other interests include a 10 per cent stake in Anglian Water. Prospective investors should take advice before considering these type of assets but they do merit investigation.

BROKER SNAPS

Shell

2,145p -20.5p

Broker says TOP PICK

RBC Capital Markets began coverage of BG Group, BP and Shell, selecting Shell as its "top pick" among the oil and gas producers, with a target price of 2,660p. The broker expects BP to "out-peform" the market, with a 520p target price, and for BG Group to perform in line with the rest of the sector, with a 1,500p target price.

Omega Diagnostics

13p -0.25p

Broker says BUY

HOUSE broker Cenkos has reiterated its "buy" rating on Alva-based medical testing kit maker Omega Diagnostics after private equity firm Cinven sold allergy testing firm Phadia to Thermo Fisher Scientific. Cenkos said the Phadia deal showed Omega has "the potential to become a much more valuable business".