Following the strong performance of the listed infrastructure sector in March, the FTSE Global Core Infrastructure 50/50 index continued its upward trend in April – albeit more modest with +1.6% (vs. -3.3% for the MSCI World Index). The positive performance in April was mainly driven by Europe, Australia and Japan, while the strengthening of the dollar contributed too.

The Fund, was up 0.8% in April, lacking the benchmark by c.80bps (net). Despite the underperformance last month, the Fund is still ahead of the benchmark YTD, while generating a 7.9% absolute (net) return in the first four month of 2022. Strong share price development of Pipeline stocks in the US, but also by Emerging Market infrastructure companies and Utilities in Europe contributed mainly to the overall return YTD.

On a stock level, the biggest positive contribution in April came from:
1) Williams (+8%) which performed strongly into its Q1 results as gas prices remain elevated;
2) Entergy (+7%) reported its Q1 results at the end of April with positive equity and securitization progress; and
3) Tokyo Gas (10%) on no company specific news.

The biggest negative contributions came from
1) Atlantia (+21%) which we don’t own as it received a EUR 23/share offer by the Benetton family and Blackstone to take the company private;
2) NextEra (-12%) traded lower as the investigation of Department of Commerce regarding anticircumvention of solar panels weighs on renewable companies in the US, including NextEra. NextEra potentially has to delay 2.1-2.8GW of solar and storage projects, but reiterated its 2022 and mid-term guidance; and
3) Union Pacific (-10%) reported decent Q1 results, but pressure from rising fuel prices in 2022 and recent service challenges impacted share price in April.

The Kempen infrastructure investment strategy strikes a balance between qualitative, quantitative, sustainability 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 equally weighted 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, NA 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 macro-economic exposure versus the benchmark.