The Fund recorded a 2.52% decline in January (C Accumulation GBP). Returns from underlying portfolio companies were mixed. The REITs held within the Fund generally performed well with Tritax BigBox, Primary Health Properties, Care REIT and Target Healthcare contributing positively. Other contributors included GCP Infrastructure, National Grid, Sequoia Economic Infrastructure and direct bond issues from Heathrow Finance and SSE.

The main detractors included renewable energy generators Bluefield Solar, Greencoat UK Wind and The Renewables Infrastructure Group (“TRIG”). Social infrastructure investors including HICL Infrastructure and International Public Partnerships were also a more material headwind to performance. The worst performer was Digital9 Infrastructure following a disappointing financial outcome on an asset disposal. However, the impact on the Fund was negligible given the company’s very small allocation in the portfolio.

The Fund deployed capital during the month adding to existing positions in BBGI Global Infrastructure, Bluefield Solar Income and TRIG at what we perceive to be depressed levels. At the point of purchase, all three companies were trading at significant discounts to net asset value and in the case of the latter two, this was an approximate 35% discount. The dividend yields on offer from these infrastructure companies, underpinned by high levels of contractual cash flows, were far in excess of the Fund’s 5% net distribution target, with Bluefield at the high end providing a potential double-digit yield. The rump position in Digital9 Infrastructure was further reduced with a view to recycling capital into more productive opportunities.

Tritax BigBox was the single best performer and contributor during the month as the shares firmed on the announcement of a significant data centre development opportunity. The REIT has acquired a 147MW data centre development joint venture - the asset is expected to be one of the largest data centres in the UK on completion with a prospective yield on cost of 9.3% after land acquisition, development costs, profit sharing and other fees. The joint venture is with a European power generator, which is providing the grid connection while Tritax BigBox provides the land and delivery of the real estate outside the JV. The JV also benefits from a 1GW pipeline on a first refusal basis. News of the deal was followed up by an end of year Trading Update, which highlighted good portfolio value growth, a strong uplift in contracted rent roll and a 3 percentage point reduction in leverage (to a 29% LTV) helped by asset disposals ahead of carrying value. The CEO noted: "We enter 2025 with growing confidence, driven by improving occupational market conditions, our expanded range of growth drivers - which now include highly accretive data centre developments - and enabled by ongoing investment in our high-calibre team, dedicated to achieving continued success for Tritax Big Box.”

UK Battery Storage owner, Gresham House Energy Storage, provided an end of year Trading Update which pointed to general improvement in financial performance. The company expects operational revenues of £42m and EBITDA of £29m for full year 2024. This would represent 12% EBITDA growth year-on-year and a 69% EBITDA margin. Encouragingly, the company reiterated that it would look to reinstate dividend distributions in 2025 while noting that revenues will be two-thirds contracted once all tolling agreements are in place.

Greencoat UK Wind announced a 4.7% reduction in its Q4 NAV driven largely by a revision to P50 production estimates. After a protracted period of lower-than-expected generation volumes and poor wind resource against budget, this seems a necessary adjustment. Greencoat sold a 40% interest in Dalquhandy and Douglas West onshore wind farms at the prevailing NAV of £41m, corroborating valuation. A final 2.5p quarterly dividend was declared (thereby meeting guidance for 2024) with dividend cover of 1.3x. The 2025 dividend target has been set at 10.35p/+3.5%, which is in line with the 2024 Retail Price Index exit rate.

In early February, the broader UK-listed infrastructure segment was bolstered following a takeover approach for longstanding PPP-focused investor BBGI Global Infrastructure. The all-cash offer from an entity controlled by British Columbia Investment Management Corp. at a price approximating BBGI’s last reported NAV could provide the catalyst for a more sustained recovery in value across de-rated infrastructure companies. At the end of January, the Fund’s trailing twelve-month net yield had widened to 6.71% (C Income GBP).