The Fund recorded a marginal loss of 0.31% in November (C Accumulation GBP) in a month categorised by significant volatility in the UK capital markets in the build up to the Autumn Budget.

In the aftermath of the Budget, bond markets calmed, and yields eased, providing a foundation from which the listed infrastructure sector could rally. The Chancellor noted key energy policies and commitments to social infrastructure. With regards to the latter, the development of 250 neighbourhood health centres (120 to be operational by 2030) reinforces a positive structural outlook for Primary Health Properties REIT. However, pending the outcome of a live consultation, a change in energy policy could result in a detrimental amendment to the way some subsidies are indexed, which is an unwelcome uncertainty for renewable energy generators.

At the start of November, the government launched a consultation targeting the basis of indexation for Renewable Obligation (RO) and Feed-in-Tariff schemes. The initiative’s purpose is to reduce policy costs and there have been two proposals put forward. The first is to move to a CPI-based indexation model from 2026, replacing the existing framework that would see (higher) RPI-based indexation continue until 2030 at which point a transition to CPI-based indexation takes effect. The second, more punitive, proposal would freeze RO buyout prices at the April 2026 level with no future uplift occurring until a “shadow price” index of the 2002 RO buyout price inflated at CPI “catches up” with the April 2026 RO buyout price. Inflation expectations imply this point would be reached in the mid-2030s, after which indexation would be re-established in line with CPI. However, most RO-accredited assets would have received final subsidy scheme payments by then, with the last RO payments running to 2037.

The consultation was unexpected (a similar consultation having occurred as recently as 2023) and was seemingly one of many flags flown by the government in the lead up to the Autumn Budget. Companies with exposure to renewable energy generation assets located in the UK updated the market as to their NAV sensitivity to each proposal. Solar names stand to be most impacted by any change to subsidy indexation owing to higher RO multiples accredited to solar generation assets and greater proportionate geographic exposure to the UK. In contrast, greater geographic and asset diversification means the implementation of either proposal would not be overly detrimental to the NAVs of entities such as The Renewables Infrastructure Group. The consultation closes in early December, and the outcome should be forthcoming in a timely manner.

A scenario where neither proposal is carried forward should not be altogether ruled out, particularly as the likely savings are modest and any change to such frameworks (i.e. “moving the goalposts”) would likely be counterproductive to the government’s intention to incentivise the private sector to support wider infrastructure development ambitions. The broader cohort of renewable energy generators held within the Fund were weak in November and three (of four) main detractors to performance during the period were Bluefield Solar Income, Foresight Solar and NextEnergy Solar.

The other main detractor was HICL Infrastructure. The long-standing social infrastructure investor declared its intentions to merge with The Renewables Infrastructure Group (the two entities share an investment manager but otherwise do not have commonality in underlying portfolios or mandates) in what proved a poorly judged proposal that was ultimately abandoned following discussions with shareholders.

Positive contributors included the Fund’s traditional equity investments. SSE was a standout, delivering a 14.7% total return as the company provided visibility around its £33bn capex plan and launched a (smaller than anticipated) £2bn equity raise to help fund it. Half-year results were robust, and the company guided towards annual dividend growth of 5%-10% from an unadjusted 2025 baseline. Water utilities Pennon and United Utilities each published solid half-year results and reiterated full year guidance with expectations of high single-digit RCV growth and strong revenue and EBITDA momentum. National Grid and Vodafone continued to perform well. Gresham House Energy Storage and Cordiant Digital Infrastructure reported good NAV uplifts providing impetus for share price strength, while Target Healthcare REIT indicated a strong start to its financial year with first quarter like-for-like rental growth (to September) driving a valuation uplift and supporting dividend progression. It is worth noting that M&A activity continues apace in the UK Care Home sector, with news of US giant Welltower’s acquisition of Barchester Homes, the UK’s second largest operator, in a deal worth £5.2bn.

Following a rapid 27% return on book cost, profits were taken in SSE, and the position was brought back towards its original weighting of c.2%. Sequoia Economic Infrastructure was reduced further, and while the company retains a significant weighting within the portfolio, capital will be directed towards other opportunities – particularly those supporting the strategy’s aim to maintain high exposure to UK-based assets and government-backed or regulated revenue models.

GCP Asset Backed Income announced a third compulsory redemption of shares as part of the company’s ongoing return of capital. On 19^th December, it is anticipated that £33.5 million/20.27% of outstanding shares will be repurchased at a level consistent with the latest published NAV, adjusted for dividend distributions in the interim.