Seeking Alpha·2026-02-10 07:40Core Viewpoint - Listed infrastructure underperformed global equities in Q4, impacted by higher long-term bond yields despite two cuts in short-term rates in the U.S. [2] - European utilities outperformed U.S. utilities, aided by improving regulations, while renewables benefited from their growing relevance in AI and policy derisking [2] Sector Performance - Underperforming sectors included natural gas utilities, energy infrastructure pipelines, communication towers, and North American rails, primarily due to higher production levels and unfavorable weather forecasts [3] - Electric utilities and toll roads were the top contributors to portfolio performance, while renewables and energy infrastructure were the main detractors [12] Regional Highlights - Western Europe was the top portfolio contributor, with U.K. electric utility SSE and Spanish toll road operator Ferrovial leading the performance [4] Company Insights - SSE, the U.K.'s largest renewable energy generator, saw its share price rise as funding risks diminished and macroeconomic concerns eased [5] - Ferrovial's U.S. listing qualified for Nasdaq 100 inclusion, and its core toll road asset in Ontario announced higher-than-expected toll increases for 2026, indicating strong pricing power [6] - WEC Energy and Brookfield Renewable were the largest detractors, with WEC's shares declining after a disappointing annual update and Brookfield's share price falling as the renewables trade cooled [7][8] Outlook - The inflection in electricity demand and solid earnings growth are expected to continue benefiting listed infrastructure performance into 2026, supported by lower nominal bond yields [9] - Electric utilities are positioned to benefit from the energy transition, climate change adaptation, and growing electricity demand, particularly from AI data centers [10] Portfolio Highlights - The strategy outperformed relative to the FTSE Global Core Infrastructure 50/50 Index in Q4, driven by strong stock selection in electric, water, and gas utility sectors [13] - Top contributors included SSE, Ferrovial, U.K. water utility Severn Trent, and U.S. electric utility NextEra Energy, while main detractors were WEC Energy and Brookfield Renewable [14] Investment Actions - Positions were initiated in Brookfield Renewable, Brazilian electric utility Equatorial, and U.S. electric utility Portland General Electric, while positions in Emera and Cheniere were exited [15]