The infrastructure index was up 0.9% in April, continuing the positive performance of 15% in Q1. The performance of the Fund is in line with the index. Global utilities were up 1% in April, supported by Electric Utilities (+1.5%) and Water Utilities (+2.1%), partly offset by Gas Utilities (-2.1%). Transport stocks were up, except for ports (-3.4%) as mainly Chinese ports were impacted by news flow of the US-China trade war. Freight rail was up strongly (+6.4%), followed by airports (+2.3%) and toll roads (+2.1%). Communication infrastructure was slightly down with 40bps.

Largest positive attribution for the Fund came from 1) DP World (19bps), which gained 25% in April as it announced that China will invest USD3.4bn in two Dubai-based trading facilities, more than offsetting the China tariff news which is negatively impacting sentiment for the port operators in general, 2) Vinci (12bps) as it benefited from strong Q1 results, and remains one of the strong performance in Europe and still has to potential to re-rate further in our view, and 3) Canadian Pacific Railway (9bps) which also gained after its Q1 results. Although the results were weak due to extreme weather, management reiterated its bullish guidance.

In terms of relative performance of the clusters, our EM Other cluster, obviously supported by DP World, and Multi Utilities contributed the most. The latter was impacted by strong performance of American Water and Sempra Energy.

The largest negative attribution for the Fund was driven by 1) Kansai (-22bps) as the Japanese Nuclear Regulatory Authority said if nuclear reactors additional safety measures (i.e. protection against terrorist attacks) are not in place by end 2020 then the reactor can’t start. Obviously it is better to start one year later and be safe, but the bad news is that the earnings ramp later, meaning the dividend increase the market wanted will also be a year later. In addition, 2) Cheniere Energy (-16bps) underperformed, for which no specific news out and the company will report Q1 results early May, and 3) Aena (-10bps) which we don't own but was up 6.7% in April as the company increased its passenger guidance to 3.7% (was 2%).

The two clusters that contributed the least were NA Pipelines (-38bps) as Cheniere was down and Transcanada up because of one positive news item on their big Keystone XL project, and US Electric (-14bps).

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, is 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 reduced our exposure to Sempra, and rotated into Centerpoint.