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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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Please read the following important information for First Sentier Global Listed Infrastructure Fund

• The Fund invests primarily in global listed infrastructure and infrastructure-related equity securities or equity related securities worldwide. Investments in infrastructure projects may involve risks including projects not being completed on time and within budget, changes in environment laws and regulations.

• The Fund’s investments may be concentrated in a single and limited/specialist sector or in fast growing economies which may have higher volatility or greater loss of capital than more diversified portfolios. The Fund may also expose to RMB currency and conversion risk.

• Small/ mid-capitalisation securities may have lower liquidity and their prices are more volatile to adverse economic developments.

• The Fund may use FDIs for hedging and efficient portfolio management purposes, which may subject the Fund to additional liquidity, valuation, counterparty and over the counter transaction risks

• For certain share classes, the Fund may at its discretion pay dividend out of capital or pay fees and expenses out of capital to increase distributable income and effectively a distribution out of capital. This amounts to a return or withdrawal of your original investment or from any capital gains attributable to that, and may result in an immediate decrease of NAV per share.

• It is possible that a part or entire value of your investment could be lost. You should not base your investment decision solely on this document. Please read the offering document including risk factors for details.

Global Listed Infrastructure monthly review and outlook

Global Listed Infrastructure monthly review and outlook

A monthly review and outlook of the Global Listed Infrastructure sector.

Market review - as at March 2025

Global Listed Infrastructure gained in March as the threat of US tariffs and an unpredictable political and economic backdrop drove demand for defensive assets. The FTSE Global Core Infrastructure 50/50 index returned +2.1%, while the MSCI World index^ ended the month –4.5% lower.

The best performing infrastructure sector was Other (+6%). Satellites rose on the view that a shifting geopolitical landscape – and the loosening of Germany’s fiscal rules — may enable European operators to recover. Emerging Markets container port stocks also gained. This “risk-off” environment also drove strong performance from the more defensive segments of the global listed infrastructure opportunity set. Water / Waste (+5%) and Utilities / Renewables (+3%) stocks gained on the appeal of their lack of sensitivity to tariffs and the broader economic environment, and inelastic demand for their essential services.

The worst performing infrastructure sector was Railroads (-5%). North American freight rail stocks declined as investors sought to assess the impact that a swathe of new US tariffs — announced on President Trump’s self-proclaimed “Liberation Day” on 2nd April — may have on freight haulage volumes. Airports (-1%) also lagged, reflecting the relative sensitivity of passenger volumes to the broader economic environment.

The best performing infrastructure region was the Asia ex-Japan (+4%), led higher by gains for the region’s utility and port stocks. The worst performing infrastructure region was Canada (flat), owing primarily to lacklustre performance from its freight rail stocks.

^ MSCI World Net Total Return Index (USD) is provided for information purposes only. Index returns are net of tax. Data to 31 March 2025. Source: First Sentier Investors / Lipper IM. All stock and sector performance data expressed in local currency terms. Source: Bloomberg.

Fund performance

The Fund returned +1.7% after fees in March, -35bps behind the FTSE Global Core Infrastructure 50/50 Index (USD, Net TR). The best performing stock in the portfolio was Chinese gas utility ENN Energy (+24%), which received a takeover offer from its parent company ENN Natural Gas (-3%, not in our Focus List). Under the terms of the offer, ENN Natural Gas will buy out the 66% of ENN Energy that it doesn’t already own for just under US$8 billion. The move is expected to help streamline the group’s operations and support growth in China’s domestic energy sector.

Canadian-listed AltaGas (+12%) gained strongly after announcing healthy December quarter earnings. The company consists of two distinct business segments – energy midstream assets including Liquid Petroleum Gas (LPG) export facilities on Canada’s west coast; and regulated gas utilities in the eastern United States. AltaGas could be a rare beneficiary of US tariffs. In the event of Asian countries applying tariffs on US energy exports, Asian customers may turn towards Canadian suppliers, boosting demand for the company’s expanding energy export facilities.

Large-cap German utility RWE (+9%), whose assets include substantial natural gas and renewable energy generation assets, gained on news that activist investor Elliott had built a ~5% stake in the company and was urging the company to “significantly increase and accelerate” its €1.5 billion share buyback programme. Investors also welcomed RWE’s decision to reduce capital expenditure on new projects between now and 2030 by ~€10 billion to around €35 billion, in response to regulatory uncertainty, geopolitical risk and higher interest rates.

US-listed AES Corp (+7%), which owns a globally diversified portfolio of electricity generation assets and is seeking to become an Americas-focused renewable energy owner and developer, also rose during the month. The company announced solid December quarter earnings numbers, held its dividend and reiterated its long-term growth plans. The company also reiterated that its backlog of future projects are shielded from changes to US renewables policy by safe harbour provisions; while its domestically-based supply chains should insulate it from the effects of tariffs. Holdings in large-cap regulated US utilities including Exelon (+4%), Duke Energy (+4%) and American Electric Power (+3%) also rose on the appeal of their defensive attributes and lack of exposure to tariff measures.

The worst performing stock in the portfolio was Canadian Pacific Kansas Southern (-10%), which operates a 20,000-mile rail network connecting Canada, the US and Mexico. The stock fell as the appeal of its unique, long-life assets and well-regarded management team were overshadowed by the threat that US tariffs may affect haulage volumes across its rail network, and by the perception that risks of a US recession were increasing. East coast US freight rail stocks CSX Corp (-8%) and Norfolk Southern (-4%), and west coast peer Union Pacific (-4%), were affected by similar concerns.

The portfolio’s airport holdings also fell during an otherwise strong month for the asset class. Japan Airport Terminal (-7%), which owns and operates the terminals at Tokyo’s Haneda Airport, underperformed despite robust fundamentals — namely healthy inbound tourism volumes and positive trends in retail spend. The stock is potentially vulnerable to a strengthening yen, which would make Japan a more expensive travel destination and could affect demand from overseas travellers. GAP (-2%), which operates twelve airports throughout Mexico’s Pacific region and two airports in Jamaica, lagged on concerns that stricter US immigration policies may affect US-Mexico travel plans, particularly for those visiting friends and family. Beijing Airport (+2%) held up better as a challenging environment for its retail segment was offset by disciplined cost control.

Fund activity

The Fund initiated a position in US-listed tower company Crown Castle, which owns and operates a portfolio of approximately ~40,000 mobile towers across the United States. The company earns revenue by collecting rent from mobile phone companies who install network equipment on its towers. In March, the company divested its substantial fibre and small cell business segment — assets we view as having weaker infrastructure credentials than its core tower business. Following this transaction, the company’s valuation multiples have scope to expand due to growing awareness its higher quality asset profile, improving tower leasing trends, and its unique appeal as the only pure-play tower stock with a business footprint located solely in the US.

The Fund also added a position in French airport operator Groupe ADP, whose assets include the two main airports in Paris; Charles de Gaulle and Orly. The company also holds a 46% stake in Turkish airport operator TAV and a 46% stake in Indian airport operator GMR Airports. ADP has materially underperformed peers in recent years owing to uncertainty surrounding the future terms of its regulatory framework and concerns about French political instability. However, we believe that these concerns have been overstated. The stock has potential to recover ground once the terms of the new regulatory framework are announced, allowing investors to focus on the company’s well-positioned Parisian assets and valuable retail business.

Market outlook and fund positioning

The Fund 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.

Trump’s early-April “Liberation Day” tariff announcement has caused turbulence in financial markets. Equity markets fell sharply on investor uncertainty and concerns about potential risks to the global economy. If the tariffs are implemented in their current form, the likeliest outcomes appear to be a period of slower economic growth and higher inflation. Typically, these conditions favour the global listed infrastructure asset class, at least in relative terms. Infrastructure growth is less dependent on the economic cycle, and many infrastructure assets have a proven ability to recover inflation. Recent falls in bond yields are also likely to prove supportive of infrastructure valuations.

At a sector level we anticipate that tariffs will have varied impacts. They are likely to be positive — at least on a relative basis — for the more defensive infrastructure sectors such as regulated utilities, mobile towers and toll roads, for the reasons noted above. Tariffs may prove challenging in the short term for some of the more economically sensitive sectors. For example, North American freight rail stocks would be sensitive to lower haulage volumes. We would note that tariff risks for Mexico and Canada — the most relevant countries to this sector outside the US — appear to have been largely priced in. Looking ahead, a key aim of the tariffs is to strengthen domestic manufacturing. The resulting onshoring drive is likely to be positive for freight rail stocks.

Energy midstream may also see a near-term slowdown as tariffs dampen energy prices, reflecting expectations of a weaker economy. However, balance sheets are in better shape than previous cycles and the sector should benefit over the medium term as domestic onshoring leads to a stronger energy demand outlook within the US, particularly for natural gas. Supply chain issues may also challenge the US renewables build-out, as the cost of imported solar panel and offshore wind farm equipment increases. Regulated US utilities should be shielded from these impacts, as their regulated business models enable rising costs to be passed through to customer bills.

Overall, we believe that the asset class remains well-positioned to perform defensively through this period of market disruption.

Source : Company data, First Sentier Investors, as of 31 March 2025.

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 base currency of the share class, the return may increase or decrease as a result of currency fluctuations. Performance data 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. First Sentier Global Listed Infrastructure Fund, Class I (Distributing) USD shares. Benchmark is the FTSE Global Core Infra 50/50 TR Index from 1 April 2015, prev. UBS Global Infra & Utilities 50/50 TR Index.

 

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.

This material is issued by First Sentier Investors (Hong Kong) Limited and has not been reviewed by the Securities and Futures Commission in Hong Kong. First Sentier Investors, FSSA Investment Managers, Stewart Investors, RQI Investors and Igneo Infrastructure Partners are the business names of First Sentier Investors (Hong Kong) Limited.

Reference to specific securities (if any) is included for the purpose of illustration only and should not be construed as a recommendation to buy or sell the same. All securities mentioned herein may or may not form part of the holdings of FSI’s portfolios at a certain point in time, and the holdings may change over time.

First Sentier Investors (Hong Kong) Limited is part of the investment management business of First Sentier Investors, which is ultimately owned by Mitsubishi UFJ Financial Group, Inc. (“MUFG”), a global financial group. First Sentier Investors includes a number of entities in different jurisdictions.

To the extent permitted by law, MUFG and its subsidiaries are not responsible for any statement or information contained in this material. Neither MUFG nor any of its subsidiaries guarantee the performance of any investment or entity referred to in this material 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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