Global infrastructure stocks posted a decent 3% return in February with the Fund slightly underperforming the benchmark. Largest positive contribution to relative performance came from the clusters EU utilities and Japan. Orsted gained 2.4%, while the share price of the European utilities remained stable on average. Both Tokyo Gas and East Japan Railway outperformed in Japan. Following the strong performance in January, our holdings in Latam slightly underperformed the benchmark. Although the share price of Transurban was up in February, the relative performance was negative with other Australian transportation names performing better.

Following the strong start of the year, infrastructure was up again in February by 3%. Following the strong performance YTD, companies have used the recent strength to raise capital. European tower company Cellnex announced a EUR 1.2bn rights issue to fund further growth, which put pressure on the share price. Although it has no firm acquisition target, we have heard about a significant number of opportunities in Europe. In addition, Equinix, a US Datacenter operator, has raised capital to reduce leverage following its buying spree.

The full year results were published by a significant number of companies in February. Although most results did not lead to significant share price movements, US Electric Evergy has lowered its guidance, which resulted in 7% drop on the day of the results. Furthermore, Italian tower company INWIT gained more than 10% as TIM and Vodafone are evaluating the possibility to consolidate their towers.

The Kempen infrastructure investment strategy strikes the balance between qualitative and quantitative analysis. Our experience and know-how in the area of infrastructure and legislation in combination with extensive data analysis, are converted into fact-based investment decision-making. Our unique valuation analysis and investment process focuses on the long term, carefully following megatrends such as digitization, urbanization and the energy transition. Next to the quantitative approach the investment strategy contains three key qualitative parameters that determine the warranted valuation: management added value, Infrastructure regulation / quality and ESG. The portfolio managers score each company covered on these three parameters. Companies that excel in ESG for example will be assigned a higher score and hence the warranted valuation for an investment increases.

Portfolio construction of the Strategy is based on cluster neutrality. The Global portfolio has 12 clusters. Examples are Australia, North American pipelines and European utilities. The portfolio weight of each cluster is approximately equal to the cluster’s benchmark weight. This ensures a diversified portfolio and neutralizes currency and macroeconomic exposure versus the benchmark.

In terms of portfolio changes we sold ENN Energy, and bought into Jiangsu Expressway. We reduced exposure to PNM Resource, and rotated that into Eversource in the US. Following decent performance, we reduced exposure to Zurich Airport, while building up a position in ADP.