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Important Note Click to maximise

This is a financial promotion for The First Sentier Global Listed Infrastructure Strategy. This information is for professional clients only in the EEA and elsewhere where lawful. Investing involves certain risks including:

  • The value of investments and any income from them may go down as well as up and are not guaranteed. Investors may get back significantly less than the original amount invested.
  • Currency risk: the Fund invests in assets which are denominated in other currencies; changes in exchange rates will affect the value of the Fund and could create losses. Currency control decisions made by governments could affect the value of the Fund's investments and could cause the Fund to defer or suspend redemptions of its shares. 
  • Single sector risk: investing in a single economic sector may be riskier than investing in a number of different sectors. Investing in a larger number of sectors helps to spread risk. 
  • Charges to capital risk: The fees and expenses may be charged against the capital property. Deducting expenses from capital reduces the potential for capital growth.
  • Listed infrastructure risk: the infrastructure sector and the value of the Fund is particularly affected by factors such as natural disasters, operational disruption and national and local environmental laws. 

Emerging market risk: Emerging markets tend to be more sensitive to economic and political conditions than developed markets. Other factors include greater liquidity risk, restrictions on investment or transfer of assets, failed/delayed settlement and difficulties valuing securities. For details of the firms issuing this information and any funds referred to, please see Terms and Conditions and Important Information.  

For a full description of the terms of investment and the risks please see the Prospectus and Key Investor Information Document for each Fund. 

If you are in any doubt as to the suitability of our funds for your investment needs, please seek investment advice.

Global Listed Infrastructure

Global Listed Infrastructure Monthly Update October 2021

Market review

Global Listed Infrastructure rallied in October, helped by robust September quarter earnings. The FTSE Global Core Infrastructure 50/50 index returned +3.7%, while the MSCI World index^ ended the month +5.7% higher.

The best performing infrastructure sector was Railroads (+14%). North American freight rail operators shrugged off supply chain hold-ups to deliver very strong earnings results. Pipelines (+6%) continued to gain on the view that high energy prices and a recovering global economy would provide the sector with favourable operating conditions.

The worst performing infrastructure sector was Toll Roads (-3%), as the spread of delta variant coronavirus continued to affect Asia Pacific traffic volumes. Faster-than-expected interest rate rises by Brazil’s central bank weighed on that market’s long duration stocks, including toll roads.

The best performing infrastructure regions were the United States (+7%) and Canada (+6%), reflecting strong gains for their railroad, pipeline and tower stocks. The worst performing infrastructure region was Japan (-8%). The country’s utilities, which are largely dependent on imported natural gas and coal, faced concerns that profits would be negatively affected by higher input costs.

Fund performance

The Fund returned +3.0% after fees1 in October, 69 bps behind the FTSE Global Core Infrastructure 50/50 Index (USD, Net TR). 

Annual Performance (% in USD) to 31 October 2021

These figures refer to the past. Past performance is not a reliable indicator of future results. For investors based in countries with currencies other than the share class currency, the return may increase or decrease as a result of currency fluctuations.

Performance figures have been calculated since the launch date. Performance data is calculated on a net basis by deducting fees incurred at fund level (e.g. the management and administration fee) and other costs charged to the fund (e.g. transaction and custody costs), save that it does not take account of initial charges or switching fees (if any). Income reinvested is included on a net of tax basis. Source: Lipper IM / First Sentier Investors (UK) Funds Limited. *The benchmark changed from the UBS Global Infrastructure & Utilities 50-50 Index on 01/04/2015.

The best performing stocks in the portfolio were US east coast freight rail operators Norfolk Southern (+22%) and CSX (+22%). Effective pricing power underpinned better-than-expected earnings growth during the September quarter. The adoption of Precision Scheduled Railroading (PSR) principles, which enable companies to run longer trains with fewer employees, saw both companies achieve productivity improvements despite ongoing domestic and international supply chain disruption.

America’s second largest waste management and environmental services provider Republic Services (+12%) gained as the US economy continued to expand, albeit at a slower rate than seen earlier in the year. Similar to freight rail, waste management companies tend to benefit from increasing levels of economic activity. Recovering volume growth and strong pricing translated to 11% EPS growth in the September quarter, enabling the company to again raise earnings guidance for the full year.

The Fund’s electric utility stocks climbed during October, led by Spanish-listed global renewables leader Iberdrola (+18%). Its share price rose as Spain’s government softened its stance on the introduction of a windfall tax to address high electricity prices. Positive September quarter earnings numbers, reflecting higher energy prices and an increase in its renewable generation capacity, provided an additional tailwind to the stock.

US peer NextEra Energy (+9%) also delivered healthy September quarter earnings numbers. NextEra Energy Resources, the company’s renewable energy subsidiary, grew its renewables project backlog by 2,160 megawatts (MWs) to 18,000 MWs, amid continued strong demand for renewables development. FirstEnergy (+8%) outperformed as it drew closer to settling a series of long-standing regulatory disputes in its Ohio jurisdiction, related to the state’s nuclear subsidy legislation. Once resolved, the company is expected to strengthen its balance sheet by selling a stake in its FirstEnergy Transmission subsidiary.

Arizona-based Pinnacle West (-11%) represented an exception to the theme of positive electric utility performance during the month. The stock fell after the state’s utility regulator proposed a larger-than-expected reduction in the firm’s allowed rate of return, citing the company’s poor record of customer service.

The worst performing stock in the portfolio was China Gas (-15%), following a gas explosion in the northeast Chinese city of Shenyang. The accident occurred at a project site operated by Shenyang Gas, in which China Gas owns a minority stake. Concerns that higher natural gas prices may affect margins, along with worries that a deteriorating Chinese property market could reduce demand for new gas connections, further affected sentiment towards the stock.

Australian freight rail operator Aurizon (-11%) underperformed following its A$2.35 billion acquisition of One Rail Australia, whose assets include freight rail operations in South Australia, New South Wales, Northern Territory and Queensland. The acquisition will see Aurizon’s business mix diversify away from coal and into bulk commodities such as grain, copper, magnetite and phosphate. However the market reacted sceptically to the price paid, and to the execution risk associated with divesting the East Coast Rail business segment, required under the terms of the deal.

Fund activity

The Fund initiated a position in Canada’s largest freight rail company, Canadian National Railway. Its 33,000 km track network stretches across Canada, as well as extending south through the Midwest US to the Gulf of Mexico, and includes exclusive access to British Columbia’s Port of Prince Rupert, North America’s closest port to Asia. Having unsuccessfully bid for US peer Kansas City Southern, Canadian National is now expected to refocus on operating efficiency improvements. The resignation in October of its CEO, following pressure from activist investors, has drawn hopes that a new CEO with PSR expertise will be appointed.

The Fund divested its holding in US electric utility Exelon after the market warmed towards plans to split its regulated utility and competitive energy generation assets into two separate companies, resulting in pleasing share price gains during the Fund’s holding period.

Market outlook and Fund positioning

The Fund invests in a range of global listed infrastructure assets including toll roads, airports, railroads, utilities, pipelines, and wireless towers. These sectors share common characteristics, like barriers to entry and pricing power, which can provide investors with the potential for inflation-protected income and strong capital growth over the medium-term. 

The asset class is positioned to benefit from a number of positive drivers. Government attempts to bolster economic fundamentals through infrastructure and green energy stimulus plans are likely to prove supportive of many global listed infrastructure firms. In particular, the ongoing repair and replacement of old energy transmission and distribution grids, along with the accelerating build-out of renewables, should represent a steady source of utility earnings growth over many years. The 2021 United Nations Climate Change Conference (COP26), held in Glasgow, highlighted the scale of the work required to successfully transition away from fossil fuels (a message reiterated by the International Energy Agency - see further details below). Large-cap, listed electric utilities such as NextEra Energy and Iberdrola will be at the heart of this vital transformation.

Ever-increasing demand for wireless data / connectivity continues to underpin steady earnings growth for Towers and Data Centres, insulating them from the ebbs and flows of the broader global economy. The changes required during the coronavirus pandemic have already led to a greater reliance on wireless data in many people’s everyday lives. The adoption of 5G technology over the medium term will require networks to handle increased data speed, and a much higher number of connected devices. Reflecting this, networking and telecoms company Ericsson expects wireless data traffic within the US to grow by a compound annual growth rate of 28% between 2021 and 2026.

There remains scope for a recovery in traffic / passenger volumes across coronavirus-impacted infrastructure sectors such as toll roads, airports and passenger rail following the rollout of vaccine programs. Reflecting this, toll roads represent the portfolio’s largest sector overweight. Traffic volumes have proved more resilient than those of other transport infrastructure assets; and toll roads are now leading the way towards (or have already achieved) a return to normal demand levels. We remain more cautious on the Airports sector, as it remains unclear how quickly consumer behaviour will return to normal; and prefer airports with a tourism / leisure focus to those with an emphasis on business travellers. 

1  Performance is based on VCC ID share class, net of fees, expressed in USD.  

^ MSCI World Net Total Return Index, USD.   

All stock and sector performance data expressed in local currency terms. Source: Bloomberg.  

Important Information

This document has been prepared for informational purposes only and is only intended to provide a summary of the subject matter covered and does not purport to be comprehensive. The views expressed are the views of the writer at the time of issue and may change over time. It does not constitute investment advice and/or a recommendation and should not be used as the basis of any investment decision. This document is not an offer document and does not constitute an offer or invitation or investment recommendation to distribute or purchase securities, shares, units or other interests or to enter into an investment agreement. No person should rely on the content and/or act on the basis of any material contained in this document.

This document is confidential and must not be copied, reproduced, circulated or transmitted, in whole or in part, and in any form or by any means without our prior written consent. The information contained within this document has been obtained from sources that we believe to be reliable and accurate at the time of issue but no representation or warranty, express or implied, is made as to the fairness, accuracy, or completeness of the information. We do not accept any liability whatsoever for any loss arising directly or indirectly from any use of this information.

References to “we” or “us” are references to First Sentier Investors.

In the UK, issued by First Sentier Investors (UK) Funds Limited which is authorised and regulated by the Financial Conduct Authority (registration number 143359). Registered office Finsbury Circus House, 15 Finsbury Circus, London, EC2M 7EB number 2294743. In the EEA, issued by First Sentier Investors (Ireland) Limited which is authorised and regulated in Ireland by the Central Bank of Ireland (registered number C182306) in connection with the activity of receiving and transmitting orders. Registered office: 70 Sir John Rogerson’s Quay, Dublin 2, Ireland number 629188. Outside the UK and the EEA, issued by First Sentier Investors International IM Limited which is authorised and regulated in the UK by the Financial Conduct Authority (registered number 122512). Registered office: 23 St. Andrew Square, Edinburgh, EH2 1BB number SC079063. 

Certain funds referred to in this document are identified as sub-funds of First Sentier Investors Global Umbrella Fund plc, an umbrella investment company registered in Ireland (“VCC”). Further information is contained in the Prospectus and Key Investor Information Documents of the VCC which are available free of charge by writing to: Client Services, First Sentier Investors, 1 Grand Canal Square, Grand Canal Harbour, Dublin 2, Ireland or by telephoning +353 1 635 6798 between 9am and 5pm (Dublin time) Monday to Friday or by visiting Telephone calls may be recorded. The distribution or purchase of shares in the funds, or entering into an investment agreement with First Sentier Investors may be restricted in certain jurisdictions.

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Copies of the prospectus (in English and German) and key investor information documents in English, German, French, Danish, Spanish, Swedish, Italian, Dutch, Norwegian and Swedish, along with a summary of investor’s rights are available free of charge at

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First Sentier Investors entities referred to in this document are part of First Sentier Investors a member of MUFG, a global financial group. First Sentier Investors includes a number of entities in different jurisdictions. MUFG and its subsidiaries do not guarantee the performance of any investment or entity referred to in this document or the repayment of capital. Any investments referred to are not deposits or other liabilities of MUFG or its subsidiaries, and are subject to investment risk including loss of income and capital invested.

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