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Stewart Investors manage investment portfolios on behalf of our clients over the long term and have held shares in some companies for over 20 years. They launched their first investment strategy in 1988.
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A monthly review and outlook of the Global Listed Infrastructure sector.
Market review - as at March 2024
Global Listed Infrastructure rose in March against a backdrop of broadly positive investor sentiment. The FTSE Global Core Infrastructure 50/50 index returned +3.4% while the MSCI World index^ ended the month +3.2% higher.
The best performing infrastructure sector was Energy Midstream (+6%), aided by a favourable demand outlook and rising commodity prices. Utilities / Renewables (+6%) also gained, helped by a growing awareness of likely increases in load growth (electricity demand) over coming years, driven by demand from data centres / AI, industrial on-shoring and electric vehicle charging. The stabilising interest rate environment also proved supportive. The worst performing infrastructure sector was Toll Roads (-1%), owing to concerns for political risk.
The best performing infrastructure region was Japan (+11%), whose electric utilities gained on indications of further progress towards nuclear plant restarts. The worst performing infrastructure region was Australia / New Zealand (flat), reflecting mixed returns from the region’s transport infrastructure stocks.
^ MSCI World Net Total Return Index (USD) is provided for information purposes only. Index returns are net of tax. Data to 31 March 2024. Source: First Sentier Investors / Lipper IM. All stock and sector performance data expressed in local currency terms. Source: Bloomberg.
Market outlook and Strategy
The Portfolio invests in a range of listed infrastructure assets including toll roads, airports, railroads, utilities and renewables, energy midstream, wireless towers and data centres. These sectors share common characteristics, like barriers to entry and pricing power, which can provide investors with inflation-protected income and strong capital growth over the medium-term.
Earnings growth for the asset class is likely to be underpinned by a number of structural growth themes over coming years. We are optimistic about the substantial investment opportunities associated with the decarbonisation of the world’s energy needs. Utilities are positioned to derive steady, regulated earnings growth by building solar and wind farms, and by upgrading and expanding the networks needed to connect these new power sources to the end user.
Our team’s recent meetings with US utility management teams have been characterized by optimism that demand growth for electricity is set to increase materially over coming years. This is likely to bolster the need for transition fuels such as natural gas, which have a crucial role to play in maintaining energy reliability and affordability. As well as underpinning utilities’ earnings growth, this is also likely to drive additional demand for North American energy midstream storage and transportation assets.
Digitalisation is another key theme for the asset class. We expect structural growth in demand for mobile data (underpinned by an ever-growing reliance on digital connectivity) to support longterm earnings growth for Towers. The adoption of 5G technology over coming years will require networks to handle increased data speed, as well as a much higher number of connected devices. The surge of interest in AI is driving data center demand, as well as boosting the need for electricity.
Source : Company data, First Sentier Investors, as of 31 March 2024.
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Important Information
Investment involves risks, past performance is not a guide to future performance. Refer to the offering documents of the respective funds for details, including risk factors. The information contained within this material has been obtained from sources that First Sentier Investors (“FSI”) believes to be reliable and accurate at the time of issue but no representation or warranty, expressed or implied, is made as to the fairness, accuracy or completeness of the information. To the extent permitted by law, neither FSI, nor any of its associates, nor any director, officer or employee accepts any liability whatsoever for any loss arising directly or indirectly from any use of this. It does not constitute investment advice and should not be used as the basis of any investment decision, nor should it be treated as a recommendation for any investment. The information in this material may not be edited and/or reproduced in whole or in part without the prior consent of FSI.
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