In this webinar, William Argent, manager of the TM Gravis UK Infrastructure Income Fund, and senior research analyst Shayan Ratnasingam joined Cameron Gardner, Head of Distribution, to provide an update on the Fund. They covered the market backdrop, the Fund's strong year-to-date performance, the case for UK infrastructure, valuations across the portfolio and where they see opportunities.

Below are the key takeaways from the webinar and you can watch the replay here:

• The Fund invests in UK-listed infrastructure, with an income-focused strategy that targets a 5% net yield. The trailing 12-month yield is currently just over 6.2%.
• The portfolio is built around soft targets rather than a benchmark: a heavy focus on regulated or government-subsidised cash flows, operational rather than development or construction-stage assets, and limited exposure to demand or volume-of-use risk.
• The team favours availability-based payments, where an asset is paid for as long as it is available and fit for purpose, regardless of how much it is used. Many of these cash flows also carry inflation protection.
• The Fund defines infrastructure as physical, hard assets with high upfront investment, high barriers to entry, long lifespans and a critical role for society or the economy.
• It currently has 29 holdings. Beneath these sit hundreds of underlying assets and projects, spanning energy, utilities, healthcare facilities and projects such as the Thames Tideway Tunnel, which was completed on time and on budget, and investing in companies funding next generation assets such as Sizewell C.

• As a long-duration cash flow strategy, the Fund is sensitive to interest rates, inflation and bond yields, and the rate outlook has reversed this year. In February, markets expected 50 basis points (bps) of rate cuts over the following 12 months. They are now assigning a probability of around 100 bps of hikes over the next 12 months,, with a 25 bps rise in November looking likely after the latest inflation data.
• UK inflation remains above 3%, well above the Bank of England's 2% target. This has been a modest positive for net asset value (NAV), because many portfolio companies have inflation-linked cash flows and inflation has run ahead of the assumptions in their valuations.
• UK gilt yields have risen over the year, in line with other markets. On balance, this combination would normally be a headwind for the strategy, yet the Fund has performed strongly.
• The team attributes part of this to defensiveness of the sector it invests in against a volatile market back drop characterised by the 'halo trade': investors favouring hard assets with low obsolescence risk, stable and defensive cash flows, high barriers to entry, regulated frameworks and support from government spending. They see infrastructure as a diversifier from the AI trade, as investors lock in profits elsewhere after a long period in which broad equity risk has dominated.

• M&A has been a theme in the sector since 2022 and has continued in 2026, albeit at a slower pace.
• Drax Group's acquisition of Bluefield Solar Income Fund was an important marker for the renewables sector, which had been harshly de-rated. The deal was struck at a discount to NAV of about 9%, against a discount of roughly 30% before the company put itself up for sale.
• Residential Secure Income plc has sold the vast majority of its assets and is in the process of winding up, with proceeds expected over the coming months.
• Consolidation is under way across closed-ended infrastructure investment companies, with wind-downs, acquisitions and strategic reviews. NextEnergy Solar Fund and SDCL Efficiency Income Trust have put themselves up for sale, and the Fund remains invested given the potential capital upside relative to their share prices.
• The team expects a more concentrated sector to emerge, centred on larger, higher-quality companies, which will continue to be core positions in the Fund.

• The Fund returned 13.7% year to date as at 16 October 2026. Performance has improved markedly since the lows of Q2 2025, and the Fund has recovered its previous highs from late 2022 and moved to new highs. October started softly, but the Fund has begun to recover in recent days.
• Every security type contributed positively. Closed-ended investment companies, at 65.6% of the portfolio, made a gross contribution of 11.85% and delivered the greatest return per unit of exposure, followed by traditional equities such as utilities and communications companies.
• Within investment companies, renewable energy generators were the largest driver. Foresight Environmental Infrastructure (FGEN), Greencoat UK Wind and The Renewables Infrastructure Group were the main individual contributors.
• REITs were mixed, with strong performance from Target Healthcare REIT offset by softer returns from Tritax Big Box. Infrastructure debt contributed positively overall.
• Negative contributors were few. Pennon Group fell as the company announced a discounted rights issue as part of a strategic rest. The equity raise will support £1bn of further investment and contribute to Pennon’s regulated asset base. The team expects participate in the rights issue to an extent.

• Income is the main component of the Fund's return over the long run. Since launch in 2016, the Fund has paid 54.5p of income per unit to the end of H1 2026. Including the provisional Q3 distribution of around 1.4p, this rises to around 56p.
• The trailing 12-month yield of just over 6.2% is, in the team's view, a reasonable expectation for the next 12 months. This compares favourably with other income-producing asset classes, particularly global infrastructure. High-yield bonds are the closest comparable.

• The top 10 holdings are relatively stable. Most activity takes place in the middle and tail of the portfolio, where the team is active but never aggressive.
• Over the past 12 months, the team has taken profits in equities during periods of strong momentum, to avoid the strategy being dominated by equity beta.
• Tritax Big Box, 3i Infrastructure and FGEN are held at relatively high weights compared with history, while Sequoia Economic Infrastructure Income has been reduced this year.
• Power and utilities remain a significant exposure. Near-term power prices have been strong since the end-June NAV updates, helped by volatility in the Middle East, and the team expects robust Q3 updates from the renewables companies. Higher power prices should help offset the impact of higher bond yields on valuations.

• Broader sector access: global infrastructure indices, such as the iShares global infrastructure ETF the team uses for comparison, are weighted towards energy midstream pipelines and demand-based assets such as toll roads and rail. UK investment companies offer access to more diverse, project-level exposure, where returns are driven by specific projects rather than general equity risk.
• Stable income: a high proportion of the Fund's underlying companies own availability-based assets or regulated utilities, which provide resilient cash flows through economic cycles.
• Real income growth: many UK frameworks have systematic inflation mechanisms built in supporting the resilience of underlying cashflows
• Higher yield: the Fund yields close to 400 bps more than global infrastructure.
• Geographic diversification: global infrastructure indices are typically 50–60% US. Blending a UK infrastructure fund with a global mandate reduces that concentration.
• Less exposure to the AI trade: much of the recent strength in global infrastructure has been underpinned by AI-related demand. The UK sector is less exposed, which should make it more resilient during market volatility.

• UK infrastructure benefits from inflation-linked mechanisms that are systematic rather than discretionary, and understanding these frameworks is a core part of a specialist manager's role.
• Directly indexed revenues: under Private Finance Initiative (PFI) contracts unitary payments are indexed and Contracts for Difference (CfDs), the government-backed agreements that pay renewable generators a fixed, inflation-linked strike price, revenue is directly indexed to inflation.
• Indexed asset bases: in regulated sectors such as energy networks and water (regulated by Ofgem and Ofwat), the regulatory capital value (RCV), the value of the asset base on which companies earn a return, is indexed to inflation, which companies earn a real rate of return on .
• The regulated asset base (RAB) model: an emerging framework used for complex, capital-intensive projects such as Thames Tideway and Sizewell C. As with networks and water, the asset base is indexed, but the model also allows revenues to be earned during construction to help de-risk these projects.
• By contrast, US utilities earn a nominal return set through rate cases (periodic tariff reviews), and securing in-period inflation adjustments is an arduous process.
• On a look-through basis, 57% of portfolio company cash flows are index-linked, a figure that has been stable and which the team considers conservative. SSE is 60% index-linked today and expects close to 80% of EBITDA to be index-linked under its £33bn capex plan. National Grid, around half of whose asset base is in the US, has structured staggered rate cases to capture indexation gradually. Tritax Big Box has around 50% index-linked rents, and its data centre pipeline introduces further index-linked triple net leases (where the tenant pays all property costs, including maintenance, insurance and taxes).

• Yield premium: historically, the Fund has yielded 250–300 bps more than global infrastructure. That spread has now widened to more than 400 bps, which the team views as an attractive entry point. Median yields across the sectors in the global benchmark are 4–5%, compared with the Fund's 6.3% net yield, or close to 7% gross.
• Discount rates: investment companies value their portfolios on a discounted cash flow (DCF) basis. The discount rate combines a risk-free rate, based on a government bond of appropriate duration, and an equity risk premium (ERP), the additional return investors require for taking equity risk.
• Room to absorb higher yields: when rates rose sharply from 2022, the ERP absorbed much of the increase, and the team believes it can do so again. Reference yields have risen by about 60 bps since the June valuation point. For Greencoat UK Wind, the team estimates that the ERP could absorb at least 40 bps of that. International Public Partnerships (INPP) has a narrower cushion but still has scope relative to its history.
• Attractive implied returns: at current share prices, the implied internal rate of return (IRR), the annual return an investor would earn buying at today's price, is around 15% for Greencoat UK Wind and around 10% for INPP. The team considers this very attractive for mature, stabilised assets with long-dated cash flows. At these implied IRR’s investors are well compensated against further yield widening.
• Other valuation drivers: higher inflation and power price assumptions could support NAVs. Strong competition for a limited pool of assets could also see discount rates harden at current levels.
• REITs (around 15% of the portfolio): Tritax Big Box, Primary Health Properties and Target Healthcare REIT all use triple net leases with embedded rental growth that can offset higher yields. Tritax Big Box points to 29% rental reversion, the gap between current rents and higher market rents, and is developing at a 9–11% yield on cost. Primary Health Properties is achieving rental uplifts of around 15% from asset management, rising to about 25% including new developments. Target Healthcare REIT's leases are 100% upward-only and index-linked, with caps and collars (upper and lower limits on annual increases).

• Discounts to NAV, the gap between a company's share price and the value of its underlying assets, have narrowed significantly this year across the roughly 80% of the Fund invested in REITs and investment companies.
• The simple average discount has narrowed from around 25% to around 19%, and the weighted average discount from 24% to around 15%.
• Much of the narrowing has come from renewables, where discounts have moved from more than 35% at the start of the year to around 20%. The team sees further scope for discounts to narrow.

• Utilities make up around 15% of the portfolio, across regulated and integrated companies. The sector rallied strongly between Q4 2024 and Q1 2026 despite rising gilt yields, leaving valuations looking rich and dividend yields at historic lows of 3% or below.
• The team took profits in Q1, which helped protect the Fund's yield and allowed reallocation to higher-yielding names. Valuations now look more constructive, and the team could add further.
• Regulated utilities are using reopener mechanisms, which allow companies to return to the regulator within a price control period for additional allowances. These provide potential upside to earnings, RCV growth and cash flow.
• Fixed income makes up around 2% of the Fund, typically in short-duration, single-name bonds that underpin the Fund's yield. Over the summer, the team added a bond maturing in August 2028 with a running yield of 6.3%, a pick-up of close to 200 bps over gilts at the time. With credit spreads tight, equity yields generally look more attractive than bonds, but the team will continue to look for relative value.

• The UK's 10-year infrastructure strategy sets out £725bn of capital spending, of which £718bn of projects are already in the national infrastructure pipeline. Around two-thirds is expected to come from the private sector, creating opportunities for the Fund's companies.
• Around 50% of that pipeline is in energy, 16% in transport and 10% in healthcare, all key sectors for the Fund. More than £400bn of spending falls under regulated frameworks, from highways and nuclear to power transmission.
• Networks: National Grid plans to invest £40bn in UK networks over five years, driving around 60% RCV growth. SSE has a £33bn capex plan over five years, 80% of it in networks, delivering around 25% RCV growth. Both are core holdings.
• Water: more than £100bn was allowed in the latest price control. The Fund's holdings, Pennon Group and United Utilities, are pointing to RCV growth of more than 30%.
• Communications: Vodafone has announced an £11bn capex plan over 10 years following its merger with Three, spanning towers, satellites, subsea cables and fixed fibre broadband.
• Investment companies: INPP participated in the financing of Sizewell C under the RAB model, with a base case return of around 10.5–12% and protection against cost overruns. INPP is also pointing to around £480m of investment at an IRR of 11%, and Greencoat UK Wind has flagged new projects offering 200–500 bps above its portfolio IRR, which would be NAV accretive.
• Engineering and construction: the team has taken positions in Kier and Renew, which offer infrastructure-like characteristics through revenue visibility and margin protection. Kier, a tier 1 contractor, has an order book of nearly £12bn, a wider pipeline of £65bn and frameworks worth around £200bn, with more than 90% of projects on cost-plus or two-stage contracts. Renew focuses on operational maintenance and reactive work for water, electricity and other networks, and is consolidating the fragmented onshore wind servicing market ahead of nearly £4bn of repowering projects by 2030. Given their cyclicality, these are smaller positions.

• Under the Mansion House Accord, participating pension schemes have committed to allocating at least 5% to UK private markets. The team views investment companies as the ideal structure for holding illiquid assets, rather than semi-liquid vehicles.
• Pension schemes are beginning to appear on the share registers of the Fund's holdings. At The Renewables Infrastructure Group, for example, pension scheme ownership increased between July 2025 and June 2026, and similar trends are visible elsewhere.
• MSCI and S&P are consulting on whether investment companies can be included in their benchmarks. Inclusion would improve the discoverability of these companies and open them up to index funds and ETFs.

• Following strong recent performance, the team retains a constructive outlook for the strategy over the near and medium term.
• They believe UK infrastructure can play a valuable role as a diversifier in multi-asset portfolios, with its focus on reliable, 'bird-in-the-hand' income.

Important information

This article is issued by Gravis Advisory Limited (“GAL” or the “Firm”), which is authorised and regulated by the Financial Conduct Authority. GAL’s registered office address is 24 Savile Row, London, United Kingdom, W1S 2ES. The company is registered in England and Wales under registration number 09910124.

The TM Gravis UK Infrastructure Income Fund (the “Fund”) is a sub-fund of TM Gravis Funds ICVC, which is a UK UCITS scheme and an umbrella company for the purposes of the OEIC Regulations. The Authorised Fund Manager of TM Gravis Funds ICVC is Thesis Unit Trust Management Limited (TUTMAN), Exchange Building, St John’s Street, Chichester, West Sussex, PO19 1UP. TUTMAN is authorised and regulated by the Financial Conduct Authority. GAL is the investment manager of the Fund.

Any decision to invest in the Fund must be based solely on the information contained in the Prospectus, the latest Key Investor Information Document and the latest annual or interim report and financial statements.

GAL does not offer investment advice and this article should not be considered a recommendation, invitation or inducement to invest in the Fund. Prospective investors are recommended to seek professional advice before making a decision to invest. References to individual companies are for illustration only and are not recommendations to buy or sell.

Your capital is at risk and you may not get back the full amount invested. Past performance is not a reliable indicator of future results. Forecasts, targets and consensus estimates are not a reliable indicator of future results, and the 5% yield target is not guaranteed. Prospective investors should consider the risks connected to an investment in the Fund, which include (but are not limited to) interest rate risk, inflation risk, concentration risk, liquidity risk and volatility. Please see the Risk Factors section in the Prospectus for further information.

This article has been prepared by GAL using all reasonable skill, care and diligence. It contains information and analysis that is believed to be accurate at the time of publication but is subject to change without notice. It is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to local law or regulation. Any recipients outside the UK should inform themselves of and observe any applicable legal or regulatory requirements in their jurisdiction.