Global Listed Infrastructure monthly review and outlook

Global Listed Infrastructure dipped in May as optimism around a potential Middle East peace agreement and strong investor interest in forthcoming Artificial Intelligence (AI) related IPOs drove a risk-on shift across financial markets.  

The best performing infrastructure sector was Other (+13%), as lower quality infrastructure assets such as satellites and Emerging Markets (EM) container ports were buoyed by upward momentum in global equity markets. Toll roads (+4%) gained on healthy traffic volumes and mergers & acquisition (M&A) developments. Airports (+3%) advanced on expectations of a possible easing of tensions between the US and Iran.

The worst performing infrastructure sector was Water / Waste (-5%). Regulated US water utilities lagged as investors favoured less defensive assets, while political uncertainty weighed on UK peers. Energy Midstream (-4%) underperformed on the view that a US / Iran agreement may reduce tension in global energy markets.

The best performing infrastructure region was Australia / NZ (+5%), reflecting gains for the region’s toll road and airport stocks. The worst performing infrastructure region was the UK (-6%), where concerns over a potential disruptive challenge to the incumbent prime minister weighed on electric and water utilities.

The Fund returned -1.1% after fees in May¹, +96 basis points ahead of the FTSE Global Core Infrastructure 50/50 TR Index (SGD).   

The best performing stock in the portfolio was French airport operator Groupe ADP (+12%), whose main assets include the Charles de Gaulle and Orly airports in Paris. The company announced resilient passenger volumes for the month of April (-1.3% compared to the same period a year earlier) despite an unpredictable operating environment. Expectations that a resolution to the US / Iran war may be drawing closer, leading to the normalisation of passenger volumes from the Middle East, also proved supportive. Swiss peer Flughafen Zurich (+7%) and Spanish operator AENA (+7%) were similarly supported by healthy traffic volumes and hopes of a Middle East peace deal.

Australian toll road operator Transurban (+7%) performed well despite an absence of material stock-specific news. Gains appear to have been driven by the appeal of its domestically focused business with limited sensitivity to geopolitical turbulence, long (~28 year) average concession life, and ability to pass on higher inflation through to road users via its tolling framework. Australian-listed peer Atlas Arteria (+3%), whose assets include a stake in the APRR motorway network in France and the Chicago Skyway in the US, also increased. During the month, the company rejected April’s A$6.9 billion takeover bid from unlisted infrastructure manager IFM Global Infrastructure Fund as “neither fair nor reasonable to shareholders”. Atlas also commissioned a valuation from an independent expert, which found the company to be worth almost A$1 billion more than IFM's offer.

The US utility sector was stirred by the prospect of a large-scale merger between two industry leaders. Virginia-headquartered regulated electric utility Dominion Energy (+5%) agreed to combine with Florida-based NextEra Energy (-11%), the world’s biggest utility company by market capitalisation. The all-stock deal, which is still subject to regulatory approval, comes at a time of sharply rising demand for electricity driven by AI and data centre growth. The transaction will create a $420 billion Enterprise Value utility with approximately 10 million customers across the US. It will match Dominion’s role as supplier of energy to Virginia (the world’s largest data centre market) with NextEra Energy’s substantial balance sheet. Following the US freight rail merger between Union Pacific (-2%) and Norfolk Southern (-3%, not held) proposed in 2025, the move also represents the latest example of large US firms pursuing mergers under the Trump administration’s business-friendly approach to corporate competition rules.

Other US utility holdings delivered mixed performance. Evergy (flat) held up well after announcing better-than-expected March quarter earnings, supported by Kansas’ Panasonic battery “gigafactory” driving strong industrial load growth. The company also flagged additional demand from new data centre customers; and reiterated its long-term earnings growth guidance of between 6% and 8%.

Sempra (-6%) announced in-line March quarter earnings, as 17% growth in net profit for its Texas-based Oncor unit was offset by flat earnings from its California utility businesses. At the end of the month, activist investor Voss Capital put forward a proposal for Sempra to spin off Oncor into a standalone, high growth, Texas-focused utility, arguing that Sempra’s current structure “masks the rapidly compounding intrinsic value of the fastest growing and largest transmission & distribution utility in North America”.

The worst performing stock in the portfolio was US Liquefied Natural Gas (LNG) exporter Cheniere Energy (-18%). Strong March quarter earnings (Earnings before interest, taxes, depreciation, and amortization (EBITDA) was +25% higher than the same period a year earlier) and a 7% increase to 2026 earnings guidance were overshadowed by concerns that this positive news may already be reflected in the company’s earnings multiples, and that demand growth for US LNG exports could start to ease if the US and Iran reach an agreement to end their current conflict.

DT Midstream (-5%), which generates contracted cash flows by transporting natural gas both to LNG export terminals on the US Gulf Coast and to domestic US customers, also gave up ground as investors took profits in the energy midstream sector. Targa Resources (-2%), which operates extensive Natural Gas Liquids storage and transportation facilities across Texas’ Permian Basin, held up better after announcing robust March quarter earnings results, supported by higher margins and volume growth. ExxonMobil, Targa’s largest customer, has expanded its Permian operations over the past year.

North American waste management company GFL Environmental (-16%) also fell during the month, reflecting investor uncertainty about its recently announced plan to acquire Secure Waste Infrastructure for C$6.4 billion. The transaction, which will increase GFL’s exposure to cyclical Western Canadian oil and gas activity, represents a strategic pivot away from the company’s previous focus on municipal solid waste and emphasis on strengthening its balance sheet. The company has a successful track record of growth through acquisition spanning almost two decades.

¹ Fund performance is based on the Singapore unit trust, net of fees, expressed in SGD terms.
All stock and sector performance data expressed in local currency terms. Source: Bloomberg.

A holding in US-listed data centre operator Equinix was divested from the portfolio. Strong share price gains during the portfolio’s holding period, reflecting mounting investor demand for AI-related exposure, reduced mispricing and moved the stock to a lower rank within our investment process.   

The strategy 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.

The asset class remains supported by several structural growth drivers. Electric utilities face increasing capital expenditure requirements to meet substantial increases in electricity demand driven by AI and data centre growth. In addition to providing additional power generation capacity, utilities are investing to expand, modernise and strengthen their electricity transmission and distribution grids. Under US utility regulation, higher amounts of capex deployed in this way typically leads to rate base growth, which ultimately supports higher earnings growth. Robust US utility earnings for the March quarter of 2026 indicate that higher demand growth is already providing a tailwind to earnings. 

Digitalisation is another key theme for the asset class. Data centers benefit from companies seeking the improved reliability and flexibility offered by migrating IT equipment from on-premises to a combination of colocation services and cloud computing. Additionally, the surge of interest in AI is driving data center demand, as well as increasing demand for electricity.  We expect structural growth in demand for mobile data, underpinned by increasing reliance on digital connectivity, to support steady revenue growth in the mobile tower sector. While recent consolidation activity within the US, Spanish, French and Italian telecom sectors (mobile towers’ primary customer base) has raised concerns about customer churn rates, longer-term growth drivers remain. The adoption of 5G technology over coming years will require networks to handle increased data speed, lower latency, and a significantly greater number of connected devices.

Airports appear well-positioned to benefit from the ongoing drivers behind global travel demand growth, including wealthy baby boomers with disposable income to spend on travel during their retirement, Gen Z prioritising experiences over possessions, and the expansion of middle-class populations in Asia and Latin America. While airport stocks have lagged since the outbreak of hostilities between the US and Iran, we believe the magnitude of the earnings impact is likely to be less severe than current market pricing implies.

Continued M&A activity and the potential divestment of non-core assets represent additional sources of support for valuation multiples across the asset class. Recent months have seen elevated levels of corporate activity, driven by industry consolidation (most recently the large-scale merger proposal between Dominion Energy and NextEra Energy) as well as the acquisition of public market assets by private market operators. We expect this trend to continue, supported by a pro-business US administration, strong demand for infrastructure assets and rising financing needs for global listed infrastructure investment programs.  

Source: Company data, First Sentier Investors, as of 31 May 2026.