When assessing alternative investments within our asset allocation framework, we prioritise strategies that offer genuine diversification. Each investment must meaningfully contribute to long-term portfolio outcomes without diluting returns or introducing undue risk.

Our infrastructure allocation exemplifies this approach. Across our portfolios, we hold positions in the ClearBridge Global Infrastructure Income Fund and the Macquarie Global Infrastructure Fund. As an asset class, infrastructure continues to be an extremely important allocation representing over 8% of our assets under management.

Infrastructure assets offer a distinct source of returns, characterised by low correlation to broader equities, inflation-protected income, and strong defensive qualities. Crucially, these assets tend to perform well during periods of market volatility, providing a stabilising effect on overall portfolio performance.

While infrastructure may lack the headline-grabbing appeal of other sectors, its resilience, long-term contractual cash flows, and alignment with essential services make it a core holding within our diversified portfolios.

How Has Infrastructure Performed?

The long-term performance of infrastructure as an asset class has been robust—both in absolute return terms and in how those returns have been achieved. The ClearBridge and Macquarie funds have consistently demonstrated strong downside protection while still capturing meaningful upside.

The ClearBridge fund, for instance, currently has a downside capture ratio of approximately 50% relative to global equities, shielding investors during periods of market stress. The downside capture ratio measures an investment’s performance relative to a benchmark during market declines, where a ratio is 50% (as in this case) it indicates the fund lost half the benchmark’s losses during downturns. Despite this defensive nature, it still retains a strong upside capture of 66%, demonstrating it captured two-thirds of the benchmark’s upside returns. Macquarie exhibits similar qualities, resulting in both funds outperforming global equity indices such as MSCI World over the past year, which is an impressive outcome for defensive investments.

Income generation has also been a key strength. The ClearBridge fund currently yields 4.7%, with Macquarie yielding 3.8%, and both target annual dividend growth of around 5%. This income-driven return profile, supplemented by selective capital appreciation, continues to deliver meaningful value for investors.

True Diversification in Action

Both funds have delivered positive returns year-to-date, in contrast to many equity-based investments which have experienced greater volatility and drawdowns. This resilience is underpinned by the very reasons we have favoured infrastructure: predictable income, inflation-linked earnings, and a defensive orientation.

Concerns around global tariffs have had a minimal impact on traditional infrastructure assets, as their revenues are often generated domestically and governed by long-term contracts. While some non traditional infrastructure segments have been affected, the funds we hold have limited exposure to these areas. The assets they hold are less cyclical, have minimal commodity linkage, and benefit from regulated revenue streams with inflation protection, all of which contributes to their defensive nature and recent outperformance.

That said, global trade uncertainty has weighed on some user-pay infrastructure and transportation assets, such as rail. Slowing global growth has affected these segments unevenly. The managers of the funds have responded by selectively reducing exposure to more vulnerable names, while also capitalising on market dislocations to add high-quality assets at attractive valuations.

Looking Ahead

Tariffs are expected to remain a limited risk for most infrastructure investments, especially regulated utilities, where revenues often reflect cost pass-through mechanisms. This means that increased costs from tariffs can typically be transferred to consumers through rate adjustments, minimising the financial impact on the utility company. Inflation protection is also embedded in many contracts, providing an additional layer of income stability.

While some segments, particularly user-pay infrastructure, may remain sensitive to trade dynamics and economic growth, both ClearBridge and Macquarie fund managers are actively navigating these risks. They continue to manage their portfolio exposure where necessary and invest in high-conviction opportunities when valuations become compelling.

Crucially, income from core infrastructure remains secure, contractually enforced by regulators, and insulated from political interference. These attributes will continue to attract investors seeking robust, predictable returns amid ongoing market uncertainty.

In Conclusion: Why infrastructure and why ClearBridge & Macquarie?

We continue to have high conviction in the ClearBridge and Macquarie infrastructure funds. Both are led by specialist teams with deep expertise in this nuanced asset class. Their experience allows them to select high quality assets with long-term, inflation-linked income streams that support attractive, risk-adjusted returns.

As a result, these funds continue to deliver what we expect from infrastructure: stable income, strong risk adjusted returns, and genuine diversification benefits, particularly in periods of heightened market volatility.

In a market environment where uncertainty is likely to persist, we believe infrastructure will remain a cornerstone of our portfolios. ClearBridge and Macquarie are the right partners to help us capture the enduring benefits of this essential and resilient asset class.