Market commentary.
The global listed infrastructure sector was weaker over August with the benchmark index (FTSE Global Core Infrastructure 50/50 Index Net Tax USD) returning -1.29%.
Global equities were stronger however, with the MSCI World returning 2.67% in USD terms.
Global long bond yields continued to climb as a response to concerns over the sustainability of government finances and inflation concerns. US 10 year bond yields climbed to 4.78% and UK bonds finished the month at 5.21%, which is the highest they have been in nearly 20 years.
Portfolio commentary.
The Portfolio currently holds 31 global infrastructure stocks and returned -1.09% for August which was ahead of the benchmark. Year to date the Portfolio is up 7.94%, which is behind the benchmark which has returned 9.24%.
With the rising bond yields, most infrastructure stocks were weaker. Despite the rise in UK yields and political volatility, the UK regulated stocks such as the Midlands water company Severn Trent and Scottish electric utility SSE PLC performed well albeit on little news. We expect the UK holdings to remain more volatile than usual despite their operational stability and mid-period regulatory timelines. US electric utilities were mostly weaker and several of the large cap stocks that we don’t own added to attribution versus the benchmark.
Concession stocks were weak due to fuel price increases and higher bond yields, with holdings such as toll road companies Ferrovial and Vinci detracting from performance.
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.
