Market commentary
The global listed infrastructure sector was stronger over June with the reference benchmark index (FTSE Global Core Infrastructure 50/50 Index Net Tax USD) returning 1.17% over the month. Global equities were softer as measured by MSCI World, returning -0.80% in USD terms. US 10 year bond yields were stable with the yield ending the month at 4.42%.
Portfolio commentary
The Portfolio currently holds 31 global infrastructure stocks and returned 0.04% (USD) for June which was behind the benchmark. Year to date the Portfolio is up 9.13% (USD), which is behind the reference benchmark which has returned 10.66%.
The risks that had concerned equity markets over previous months appeared to recede, from the market’s perspective. Most notably, the market became progressively more optimistic in relation to prolonged peace prospects in Iran. From an infrastructure perspective this supported the transport concessions such as airports and toll roads.
The UK has also been a market that we have been watching carefully, as the likelihood of Andy Burnham becoming Prime Minister increased. He has made various comments about wanting “stronger public control” over water and energy, although he has not been explicitly calling for nationalisation (except in relation to the troubled Thames Water). Our UK water and energy positions were moderately stronger over the month, and continue to perform well from an operational and earnings perspective.
Most of the main detractors to performance, relative to the index, were the more economically sensitive stocks that we exclude from our infrastructure definition and which performed strongly in this more “risk on” environment. Telecommunication towers were also weak, and so our overweight position to this sector detracted.
Outlook
Despite ongoing geopolitical volatility, 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.
