Market commentary
The global listed infrastructure sector was weaker over May with the benchmark index (FTSE Global Core Infrastructure 50/50 Index Net Tax USD) returning -2.32% over the month. Global equities were much stronger as measured by MSCI World, returning 4.61% in USD terms. US 10-year bond yields crept higher again with the yield ending the month at 4.45%. Long bond yields around the world have increased since the end of February due to concerns over the inflationary impact of the conflict in Iran.
Portfolio commentary
The Portfolio currently holds 32 global infrastructure stocks and returned -2.38% for May slightly behind the benchmark. Year to date the Portfolio is up 9.08%, which is behind f the benchmark that has returned 9.38%. The Portfolio holdings in the UK regulated water and electric utility companies were weak over May (down ~10% on average). Despite a solid set of full-year results which was inline with or beat our expectations for the financial year ending March 31, the UK macro and political uncertainty dominated. UK 10-year bonds were above 5% due to fears of fiscal unsustainability (ended the month at 4.81%). The future of UK PM Starmer remains in question, and we are watching developments closely.
Outlook
Despite ongoing geopolitical volatility and further Iran war uncertainty, the listed infrastructure sector remains defensive and well positioned to keep building assets and earnings for investors. Large amounts of capital continue to be invested by infrastructure companies to facilitate mega themes of our time including decarbonisation, digitalisation, water quality and transportation.
