Insights

Portfolio Manager Eric Bright discusses infrastructure outperformance, institutional buyer interest, a recent addition to the portfolio, the Fund’s composition, and the investment outlook for the remainder of 2025.

What has been driving infrastructure stocks’ outperformance versus the overall market over the first six months of 2025?

Infrastructure has demonstrated resilience in a volatile market environment. On a year-to-date basis through the end of June, the S&P Global Infrastructure Index has risen over 15% compared to the S&P 500 Index’s return of 6%. The key performance driver has been investor sentiment toward infrastructure stocks. Investors have increasingly sought to diversify their portfolios away from mega-cap stocks into defensive, income-generating solutions, leading them to revisit sectors such as infrastructure.

This renewed interest has allowed infrastructure to decouple from the direction of interest rates, which had been the primary driver of its underperformance over the past few years.

Would you please discuss institutional buyers’ interest in infrastructure?

Large institutional investors continue to seek exposure to investment themes such as digital infrastructure, energy generation, healthcare, and real estate. We continue to view our businesses as attractive candidates because many of them have high-quality operational assets, strong management and operational teams, and healthy growth pipelines including development and construction activity.

For example, two holdings—Innergex and Assura—have been subject to takeover activity this year.

• Innergex, a Canadian renewable energy producer, was acquired by CDPQ at approximately $10 per share—a 58% premium to its last close and 80% above the 30-day average price. This transaction validated the Fund’s thesis that listed renewables remain significantly undervalued.
• Assura, a U.K. healthcare REIT, received a takeover offer from KKR and Stonepeak as well as Primary Health Properties, highlighting the strategic value of healthcare assets in a consolidating market.

Would you please discuss a recent addition to the portfolio?

We added Grenergy Renovables, an energy generation business domiciled in Spain. The challenge with renewable energy is that generated power is intermittent and subject to the availability of sun or wind. Grenergy has been developing battery storage to pair its solar sites with batteries, charging the battery when it’s sunny and then releasing the energy to the grid at times of high demand. This technology has been a profitable endeavor for Grenergy, earning a mid-teen internal rate of return on some of its projects, particularly in places such as Chile, where power demand is coming from various sectors including mining.

What is the composition of the portfolio as of June 30, 2025?

As of June 30, 2025, the digital infrastructure sector comprises about 30% of the Fund followed by energy generation and storage at 30%.

In terms of country allocation, we have been gradually increasing the Fund’s European allocation as we believe there is a strong macro environment in Europe with solid infrastructure businesses. As of the end of the second quarter, the top countries represented in the portfolio included the U.K. at approximately 30%, the U.S. at 28% and Canada at 16%. The Fund’s allocation to stocks in other European countries was approximately 15% as of June 30, 2025.

What is your investment outlook for infrastructure companies

There are three reasons we maintain a positive outlook on infrastructure.

1. An improving macro environment. Investor sentiment toward infrastructure has been positive as rates become a potential tailwind with the possibility for three rate cuts in the U.S. in the next 12 months. We also see many companies have continued to earn strong profits in spite of the current uncertain environment and geopolitical activity.
2. Infrastructure valuations remain attractive. Even with the outperformance over the S&P 500 this year, we believe many infrastructure companies remain undervalued.
3. Business fundamentals remain solid. While rate cuts have not occurred as quickly as the market initially thought, many companies continue to execute on earnings growth. Many are also buying back stock and deleveraging. Finally, demand drivers for these sectors remain intact.