Global Equities

Dear Investor,

We provide this monthly report to you following conclusion of the month of September 2025.

September, historically the weakest month in global equities, saw broad-based rises in global equities. The majority of major markets showed substantial gains with China (+7.3%) producing outsized returns following significant gains from large cap tech. US markets logged the best September in 15 years in the S&P 500 (+3.7%) and Nasdaq (+5.7%), driven by persistent AI optimism and resilient corporate earnings. Japan also produced impressive gains, with the Nikkei up 5.9%.

Listed Infrastructure was positive 0.92% for the month. Active positions in Construction and Engineering and Rail Transportation were the primary contributors to performance. The best performing stock for the month was Sterling Infrastructure (+22.5%), further capitalising on momentum from e-infrastructure. NRG Energy was up 13.6% following increased guidance. Deutsche Telekom (-7.5%) was the worst performing stock amid relative market weakness in Germany and weakness in T-Mobile shares. The strategy took profits in Vista Corp, closing half the position. The stock has increased over 590% since entry into the portfolio in late 2023, and we have consistently taken profits in this position since entry. We believe that the valuation may be stretched and near term much of the good news for the stock is priced in.

Market Outlook

Strength in US equity markets continues to paper over US economic data trending in the wrong direction. Inflation data remains elevated although contained between 2-3% for now. PCE, the Fed’s preferred measure of inflation, came in line with consensus at 2.9% for August. The latest US employment data for August 2025 shows weak job growth and rising unemployment, reflecting a cooling labor market. In a somewhat concerning sign for the US economy, the U-6 unemployment rate, which includes those underemployed, has increased to 8.1% from 7.5% in January. Nonfarm payrolls increased by only 22,000, well below expectations and down from a revised gain of 79,000 in July. We believe that the trends in economic data will be too difficult for the Federal Reserve to ignore, and short-term rates will trend downward. We also expect a steepening of the curve with long-term rates remaining elevated.

Increasing power prices are straining consumers across the US, and demand from data centres is only expected to increase over the coming years. At best, the administration’s ambitions of building more nuclear capacity are a decade away. In the near term, the administration is looking towards coal and gas to power its ambitions of reindustrialisation. The majority of coal-fired power stations across the US are flagged for retirement within the next decade (34 in 2025), and lead times for gas-fired generators are now over 7 years, making upgrades and retrofits to existing coal capacity possibly the only near-term option for meeting baseload power needs. We believe that US utilities that have exposure to coal generation will outperform in the near to existing coal capacity possibly the only near-term option for meeting baseload power needs. We believe that US utilities that have exposure to coal generation will outperform in the near term.

In 2008, the Global Economic Forum ranked Germany third in the world for infrastructure quality. Since then, a prolonged period of underinvestment has left Germany facing a growing backlog of neglected assets: over 4,000 bridges are in disrepair and declining rail performance (Deutsche Bahn reporting losses of €2.3 billion and €1.77 billion in 2023 and 2024 respectively). The German economy has been stagnating, and to retain international competitiveness, the Merz Coalition has created a €500bn fund to invest in Germany’s ailing infrastructure to be spent over 12 years. However, with a long list of upgrades and repairs, this figure may fall short. We see the bulk of the benefit of these infrastructure upgrades flowing into construction businesses. A shift to sensible energy policy combined with infrastructure upgrades will go a long way to stemming the bleeding in the German economy. We remain underweight Germany but are actively looking for stock-specific opportunities.

Whilst we see signs of economic weakness across many developed economies, we believe that the confluence of decreasing rates and AI capex expenditure will outweigh investor uncertainty from weak economic data.