Insights

Portfolio Manager Eric Bright provides an update on the infrastructure sector, where he is seeing opportunity, and why investors should take a closer look at infrastructure despite the strength in tech stocks.

What areas of infrastructure were strong in the third quarter of 2025? What areas were weak?

Utility stock performance was strong, with companies benefiting from grid modernization and growing exposure to data center demand. Power generation assets have rebounded as investor interest returned, supported by the expectation of lower interest rates and select merger and acquisition (M&A) activity that lifted valuations.

The most significant underperformance came from digital infrastructure. After an early-year rally in tower companies, performance moderated due to concerns around carrier spending. For example, data center holding Equinix announced a higher-than-expected investment plan to expand long-term data center capacity, which hurt the stock. While management’s strategy is seen as positioning the company for future growth, near-term earnings pressure caused the share price to pull back. We consider the reaction to be driven by near-term concerns rather than fundamentals, and we believe the investment plan strengthens our long-term case for the stock.

How much of the recent strength across sectors—industrials, utilities, energy—reflects fundamentals versus spillover from AI-driven enthusiasm?

AI growth has been a key theme, however we see risks in overly optimistic projections, especially for utilities and data centers. We prefer lessspeculative businesses such as Equinix, which provides global digital infrastructure services by operating co-location data centers and offering interconnection services that allow businesses to connect with partners and customers. The company focuses on proven demand and tenantdriven expansion rather than speculative large-scale builds. While Equinix is allocating more capital expenditures toward AI-related opportunities, its core strength remains in retail co-location and cloud connectivity. This disciplined approach provides exposure to AI growth without overreliance on uncertain, long-term demand.

Where are you finding new opportunities?

This quarter, the Fund expanded its exposure to essential infrastructure by adding three grid utilities, a leading rail operator and a water utility, reflecting both structural growth opportunities and attractive valuations.

On the grid side, we initiated a position in Terna, an independent electricity transmission system operator in Italy. Terna is incentivized to invest in modernizing and expanding Italy’s grid. We purchased the stocks after a pullback, viewing it as a compelling entry point.

In the U.K., we added SSE, which combines grid transmission assets with a growing portfolio of renewables, hydro, and gas generation. We believe SSE is well positioned to deliver long-term, well-funded growth without needing to raise equity.

We also took a small position in Hydro One, Ontario’s province-wide grid operator. Supported by strong demographics and population growth in Toronto, Hydro One represents what we believe to be one of the highestquality names in the infrastructure sector, offering steady demand and attractive investment potential.

Beyond grids, we also added Canadian National Railway. While it has long been recognized as a premier operator, the stock is currently trading significantly below U.S. peers that are subject to takeover talks. This created an appealing entry point, giving us high-quality exposure to rail with some downside mitigation and long-term upside potential.

And finally, we also initiated a position in a water utility company in the U.K. Severn Trent Water is the largest utility company serving millions of customers in England and Wales, and we believe the highest quality of its peers.

Following these purchases, digital infrastructure remains the largest portion of the portfolio, at approximately 30%, followed by energy generation and storage at 25%. Diversified infrastructure and utilities each comprise approximately 15% and transport and health care stocks each make up about 7% of the portfolio.

In the face of continued tech strength, why should investors take a closer look at infrastructure?

We believe infrastructure could provide defensive cash flows and exposure to long-term growth themes such as artificial intelligence and the need to diversify energy sources. In a slowing macro environment, this balance of resilience and opportunity potential is appealing, along with attractive valuations. We have also seen correlations between infrastructure and global stocks fall in 2025, offering diversification beyond tech stocks.