Global Listed Infrastructure monthly review and outlook

Global Listed Infrastructure edged higher in June as investors shrugged off ongoing US tariff uncertainty and tension in the Middle East. The FTSE Global Core Infrastructure 50/50 index returned +0.9% in June, while the MSCI World index ended the month +4.3% higher.

The best performing infrastructure sectors included Towers / Data Centres (+2%); large-cap US tower operators were supported by the appeal of their domestically focused business models, stable cash flows and reasonable valuation multiples. The worst performing infrastructure sector was Airports (-2%) as higher oil prices weighed on the sector.

The best performing infrastructure region was Japan (+3%), owing to gains for its electric utility stocks. The worst performing infrastructure region was Canada (-2%), where large-cap energy midstream stocks underperformed as investors took profits following gains over the past year.

The Portfolio invests in a range of listed infrastructure assets including toll roads, airports, railroads, utilities and renewables, energy midstream, wireless towers and data centers. 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. Price increases are typically linked to inflation, with negotiated compensation for additional capital expenditure. Over the medium term, additional road capacity will be needed to reduce urban congestion in the developed world and to support economic development in the developing world. In the absence of sufficient government funding, toll road operators are well-positioned to deliver this.

The portfolio is also overweight airports, via European, Mexican, Japanese and Chinese operators. Demand for air travel is being driven by a range of factors, including developed world baby boomers enjoying a wealthy retirement, robust demand from Generation Z prioritizing travel spend over the accumulation of material possessions, and an expanding middle class in the developing world.

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 centers, 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, adding new gas-fired power plants, and continuing with the build-out of renewables. 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 gas-fired power plants, leading to additional growth opportunities for US-based energy midstream companies.

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