Global Listed Infrastructure monthly review and outlook

Global Listed Infrastructure finished an eventful month higher against a backdrop of evolving US tariff news flow. The FTSE Global Core Infrastructure 50/50 index returned +1.7%, while the MSCI World index^{^} ended the month +0.9% higher. 

The best performing infrastructure sector was Toll Roads (+6%), reflecting the appeal of domestically focused businesses with limited direct exposure to tariffs. Water / Waste (+6%), Towers / Data Centres (+5%) and Airports (+5%) also performed well. 

The worst performing infrastructure sector was Energy Midstream (-4%), as lower oil and natural gas prices and the prospect of a potential economic slowdown raised concerns about the sector’s growth outlook. Railroads (-3%) also lagged on the view that tariffs were likely to result in lower haulage volumes for North American freight rail operators – both directly if fewer goods were to enter the US from abroad; and indirectly if they were to trigger weakness across the US economy.

The best performing infrastructure region was Latin America (+11%), aided by strong returns from its toll road and airport stocks. The worst performing infrastructure region was the United States (-2%). Regulatory uncertainty weighed on US utilities with renewables-focused operations, while its freight rail and energy midstream stocks lagged for reasons outlined above.

^{^} MSCI World Net Total Return Index (USD) is provided for information purposes only. Index returns are net of tax. Data to 30 April 2025. Source: First Sentier Investors / Lipper IM. All stock and sector performance data expressed in local currency terms. Source: Bloomberg.

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.

Toll roads remain the portfolio’s largest sector overweight. Domestically focused business models give them limited direct sensitivity to tariffs or trade restrictions. Revenues tend to be robust, with consistently high operating margins of between 60% and 80%. Price increases are typically linked to inflation, with negotiated compensation for additional capital expenditure. Although the earnings growth rate of these companies may reduce as inflation eases, free cash flow generation should remain healthy. This is expected to reinforce balance sheet strength and increase share buyback opportunities.

The portfolio is also overweight mobile towers via US, European and Chinese operators. The sector continues to benefit from structural growth in demand for mobile connectivity. Stable, defensive cash flows and long-term contracts make them less sensitive to the economic environment. Having underperformed the broader market during a period of rising / elevated interest rates between 2022 and 2024, we continue to see appealing value in this segment of our opportunity set, even after outperformance so far in 2025.

A substantial portion of the portfolio consists of utilities / renewables. These stocks are set to benefit from unprecedented growth in demand for electricity, being driven by the needs of AI and data centres, as well as industrial onshoring and a broad-based move towards electrification. This backdrop is leading many utilities to pursue an “all-of-the-above” approach to power generation – extending the life of existing coal and nuclear plants, as well as adding new gas-fired power plants, continuing with the build-out of renewables and, with an eye to the longer term, investigating the possibilities of next-generation Small Modular Reactor nuclear units. Regulated utilities typically earn an agreed return on money spent in this way, meaning that additional opportunities to spend capex are supportive of earnings growth.

The portfolio is underweight energy midstream. Within this space, the portfolio has overweight exposure to US energy midstream stocks but is substantially underweight Canadian companies, which tend to have higher leverage and slower growth. We prefer US-listed operators servicing low-cost basins; or that are positioned to benefit from growth in US exports. Rising demand for electricity in the US, as well as being positive for utilities, is also likely to support demand for natural gas as a feedstock for gasfired power plants, leading to additional growth opportunities for US-based energy midstream companies.

Source : Company data, First Sentier Investors, as of 30 April 2025.