25 June 2026 (pre-recorded 19 June 2026)
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[INTRODUCTION]
Staci West (SW): Welcome back to the Investing on the go podcast brought to you by FundCalibre. Infrastructure has long been valued for its defensive qualities and reliable income, but this interview takes a closer look at how the asset class is evolving.
James Yardley (JY): I’m James Yardley, and today I’m joined by Peter Meany, the fund manager of the First Sentier Global Listed Infrastructure fund. Peter, thank you very much for joining us today.
Peter Meany (PM): Thank you. Nice to be here sunny London during the World Cup.
[INTERVIEW]
JY: Yes. A rare spell of sunshine in London. But so I mean infrastructure, I mean, it’s obviously a very interesting asset class. So maybe if you just wanna start with a little overview of why investors should be thinking about infrastructure for their portfolios and where the sector sort of is at the moment.
PM: Yeah, I think listed infrastructure is a great compliment to a portfolio. Markets have done very well over recent years. Tech’s been very exciting but listed infrastructure can, you know, help with defensive returns in a potential down market going forward. So we’d always say the asset class can offer a 3% to 4% dividend yield 5% to 6% earnings growth. And we are seeing better growth than that right now, which we’ll talk to. A combination of inflation protection growth that is structural by nature, you know, long term drivers of that growth and a beta typically to down markets versus the MSCI World of about 0.5, 0.6. So a good sense of preserving capital when things become uncertain.
JY: Yes, good downside protection. I mean, I guess infrastructure has always been thought of as that more defensive income focused asset, but in recent years, of course, with the AI build out and the demand for data centres and energy there has become more of a growth element to the story. It still keeping those defensive characteristics alongside that extra growth?
PM: Yeah, I think it’s the thing that’s most underappreciated about the infrastructure sector is the potential to grow: beyond the income, beyond the inflation protection and start to push into that double digit total return over time. Right now, we’re seeing more growth, I think, than we ever have. And importantly the risk that’s been taken by companies is not going up to deliver that growth because where some of that unique growth is coming from is regulated utilities particularly in the US market.
The combination of AI data centre power demand where we are seeing an extra, you know, 10, 15, 20% growth in the system will be required over over the next 10 years is creating a real opportunity for our regulated businesses to grow at perhaps twice the rate that they have historically, but importantly, the business model has not changed. It’s still capital investment dollars in the ground grow the rate base, and we get an agreed return on equity on those assets to deliver earnings per share growth.
JY: And there have obviously been some concerns that we are in maybe, or we may at some point be in a bit of an AI bubble, or there may be a big downturn in the tech stocks and perhaps some of the AI spend. How would that impact some of your utility names?
PM: Yeah. What’s been happening in tech is extraordinary you know, a trillion dollars of of capital investment from big tech — that creates an interesting opportunity, but also a lot of risk around what will the return on capital be on that investment. What will the future revenue models be? A lot of uncertainty. The difference with the regulated utility story is that we know what the returns are gonna be. We know that extra $3 billion CapEx program, to support a gigawatt scale data centre with clean energy, wind and solar and batteries, a new transmission line, a new substation, all of that is signed off by the tech company, by the governor of the state, by the regulator. And then only at that point when a large load tariff agreement is signed with the tech company, you know, is that information released to the market and starts to get built into both forward CapEx and earnings guidance. So I have a high degree of certainty over the next five to 10 years of both capital investment and what the return on that will be.
JY: So I think the core of your portfolio seems to be in utilities. For our listeners, what other themes and what other elements are there in the infrastructure portfolio?
PM: Yeah, so around half of the portfolio is in regulated utilities predominantly in the US but also in Europe and the UK. Then the other half of the portfolio combination of transport, so toll roads, airports, and railroads, energy typically pipelines and LNG export terminals, and then into the digital infrastructure wireless towers and data centres form the full component there.
Couple of areas that we’re most excited about at the moment the freight railroad sector in the US beyond the AI data centre story. The other thing playing out in the US is the onshoring of advanced manufacturing. So with the Biden Ships Act and then the Trump tariffs over recent years, there’s been a carrot and stick approach to bringing more manufacturing to the US market. And hundreds of billions of dollars have been invested in manufacturing for not just semiconductors, but wind turbines and solar panels and batteries and electric vehicles and all that.
Manufacturing, we’re starting to see push up industrial activity which ultimately will feed its way onto more railroad volumes. So railroad volumes have been in decline almost in an industrial recession in recent years. We’re now starting to see that pick up from say a minus 2% volume growth to a plus 4% growth. And there’s huge operating leverage with railroads if they can add to that volume growth. Their ongoing price increases, their ongoing efficiency, operating efficiency some share buybacks. You start to get double digit earnings per share growth going forward.
The second area of interest is airports. We’re a long term fundamental often contrarian investor. And what we saw back in time through the Ukraine war and more recently with the Iran war is airports did take a bit of a hit. There was uncertainty around travel, particularly through the Middle East. There was a significant increase in jet fuel prices, which impacts customer tickets. And that saw some of the airport stocks down 10 to 15% during that sort of April/May uncertainty of 2026 we moved some of the portfolio out of energy midstream that was doing really well into airports that have been hit. And we’re confident that on a six to 12 month view those airports will recover nicely.
JY: Very good. And infrastructure sometimes gets labeled perhaps unfairly as a bit of a bond proxy. I mean, obviously the last few years we’ve seen interest rates climb, and we’ve now got back to a more kind of normalised level of rates. I mean, how much does the asset class depend on the outlook for rates going forward, or are we now at a point where it’s not that important and it’s unfair to perhaps put it in that bond proxy category? I mean, as you said, there’s a number of growth stories which sort of have nothing to do with the rate cycle.
PM: Yeah, I understand why people consider it more bond-like. These are long duration assets. They produce a lot of income and they often do carry higher levels of leverage than the broader market. But I think that’s justified given the more stable regulated, contracted nature of those cash flow streams. As we discussed earlier, you just mentioned, that the growth is an underestimated area that through time when you look out over 10, 15, 20 years, we can see total returns very consistent with the broader equity market but with significantly lower volatility and risk.
In relation to bond markets I’d probably say we need to make the distinction between real and nominal bonds. So if nominal bonds are rising and inflation is the main driver, then that’s not a concern. In fact, we feel that infrastructure can be a net beneficiary of rising inflation because prices are typically linked to inflation through regulation or contracts.
What we’re more concerned about is a arising real bond yields, which is a genuine valuation headwind. But to your point, it does feel like in most countries around the world, real bond yields have normalised, you know, two sensible levels now. So I feel like most of that risk is behind us.
JY: Very good. And you said before you have a significant portion of the portfolio in the US – I think it’s a bit over 50% – how are you feeling about emerging markets at the moment? Is is that an area you invest in much or whether there might be ideas in the future?
PM: Yeah, we’re a global strategy. So we do look at emerging markets. Historically we’ve generally been quite cautious on EM. The political, regulatory, legal risks that you take on there are greater. So we have to make sure we get compensated for that risk. The portfolio has typically been maybe five to 10% in emerging markets historically. Right now, if we look around I’d say China’s been quite a challenging market for infrastructure. And just broadly the whole Chinese market you know, has been challenging. And we’ve held some positions there, but you know, fair to say, they’ve gone from value to deep value in the last year or two. But, you know, trading at very interesting levels, so more, more of a hold at this point in time. We’ve seen better opportunities in Brazil and more importantly in Mexico some of our Mexican airports and toll roads, you know, have delivered some, some terrific term returns through time. So we’re always open-minded to select emerging market opportunities if we get compensated for the additional risk.
JY: And what are valuations like for the asset class at the moment?
PM: Well, overall, I think they look good. Both in absolute and particularly in relative terms the US utilities which is, say 35% of the portfolio are trading at a 15% discount to the broader market. So there’s real potential there for sector rotation towards utilities if there’s uncertainty in markets going forward. We also think that that discount is unfair given that they’re growing, historically only grew at 4% or maybe 6% per annum, they’re now growing at 8% or even 10% per annum. And the market’s not rewarding them, I think, for that growth. So fundamentally that will play out over time if we don’t get that sector rotation.
And then other sectors as mentioned, I think toll roads and airports still, you know, show very good value. I think the earnings upgrade cycle from front railroads will make their multiples look better than the headlines suggest today. And probably the only sector where we are seeing sort of full valuations is in the energy midstream space naturally because of the Iran war tensions, and that’s starting to come back to more reasonable levels and probably data centres because of the hype around AI and SpaceX data centres probably a bit fully valued as well, but a couple of pockets within an overall good value opportunity.
JY: And just finally then, Peter, I mean, you are an incredibly experienced manager. You’ve been doing this for a long time. You’ve seen many cycles. So what is your outlook for the asset class going forward today, and how does it compare to history? Are you are very confident that this is a good entry point? Is that fair to say or?
PM: Yeah, I’d go full circle to where we started the conversation. Historically we looked for a 3% to 4% yield that’s very much intact today. And I have a high degree of confidence in that being delivered. Historically, we’ve grown at 5% to 6% per annum. I think we’re seeing better growth now than the last 20 years. Because of the US electric utilities pushing their growth rates up, to 8%, even 10% per annum you know, the sort of boring part of our portfolio is delivering a above normal growth. So I think our growth can surprise on the upside, best we’ve ever seen.
And, as just mentioned, valuations look very sensible if not cheap in a few areas. So all that combined. And then I think it’s also always important to talk risks. The two biggest risks in the sector: one political regulatory interference. I feel like we’ve had a lot of that in the last few years. So a lot of those risks are well reflected in prices and a sharp rise in real rates second risk.Which again, as discussed I think is is probably more behind us than in front of us. So yeah, I feel very good about the forward outlook for listed infrastructure from here.
JY: Fantastic. Well, thank you very much for joining us today, Peter. That’s been really interesting.
PM: Thank you.
SW: First Sentier was one of the pioneers in providing access to this asset class with Peter one of the most experienced manners in the space — running this fund for more than 15 years — the First Sentier Global Listed Infrastructure fund seeks to deliver income and some capital growth by investing in listed infrastructure companies around the world. To learn more about the fund please visit fundcalibre.com and don’t forget to subscribe to the Investing on the go podcast, available wherever you get your podcasts.
