Ben also covers political risks in the US, France and the UK, the key contributors and detractors over the period, and his outlook for the portfolio.
Key takeaways
The underlying assets performed as expected, but infrastructure share prices fell as government bond yields rose. US 10-year Treasury yields moved from just under 4.5% to about 5.3% over the quarter.
Infrastructure has good inflation protection built in for most assets, as toll roads and many utilities can raise prices with inflation, although Ben notes this is not universal and the detail matters.
Political risk is a key theme, with Ben monitoring US governor races and consumer pushback on data centres, French corporate tax proposals affecting Vinci, and easing nationalisation concerns in the UK.
The main detractors were tower companies such as Crown Castle and Cellnex, which are more rate and inflation sensitive, and motorway companies including Vinci and Ferrovial. UK utilities were a positive contributor.
Ben views the outlook as attractive, as unchanged cash flows mean the embedded returns of these assets have shifted higher. He also notes that the portfolio’s defensive, monopolistic assets are not overly exposed to the AI theme.
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