Bianca MacMillan, Associate Director at Gravis, speaks to host Jo Grove in this Kepler Trust Intelligence Market Matters podcast. They discuss a range of topics including the investment case for infrastructure, future-proofing portfolios against geopolitical risk, and the future for responsible investing. You can find this podcast on Spotify, Apple and Youtube.

The time stamps and transcript below.

00:00 Introduction

00:28 Background to asset management 

03:40 Thoughts on markets in 2025

04:47 What infrastructure offers investors

06:21 The merits of investments trusts over passive funds

08:06 The future for responsible investment

10:27 The role of private capital & PPP

12:04 Changes to valuations

13:22 Challenging misconceptions

14:32 Future-proofing against geopolitical risk

16:10 Key performance drivers over next few years

17:28 Thoughts on most attractive opportunities

18:35 Risk warning

Jo Grove (JG): Could you start off by us talking through your background in terms of what initially drew you to the investment industry and any particular challenges that you might have faced along the way?

Bianca McMillan (BM): I actually studied engineering at university and initially thought that was what I wanted to do. I had big ambitions and a lot of passion for building bridges. That was what I set out as my intention. Although I did really love the course, after a couple of work experiences, I didn't quite see myself working as an engineer day in, day out. So although I did receive my Master's in Energy, Sustainability, and the Environment, I pivoted into finance.

I joined EY (Ernst & Young), so one of the big four, and studied to get a CA - chartered accountancy qualification - and was very much focused away from infrastructure, looking at financial institutions - banks, predominantly. I didn't quite enjoy that that much. I missed something a bit more fast-paced. So I left and joined investment banking, as I thought it would be a more sexy place to work, as the name suggests. I did a year working on transactions. Actually, whilst I was in investment banking, I advised Gravis on the majority sale of their business to the ORIX Group. Whilst I was helping draught a lot of the sales materials for Gravis, I thought, hey, this sounds a lot more interesting and more in line with my passions working within investments for infrastructure. I started thinking ‘What can I do to get into that space and combine engineering with finance?’

I left investment banking and I joined ENGIE, the French energy company, within the acquisitions team. There I was looking at acquiring solar, wind farms, battery, so pretty conventional renewable energy assets. Then, after a couple of years there, I saw the opportunity at Gravis, which felt a bit like a full circle moment, and joined the investment team here at Gravis.

It's a really great fit for me because I get to look at what I'm more passionate about, which is decarbonising energy infrastructure and the wider infrastructure in the UK and potentially wider in Europe, and also using that finance experience from investment banking and from the CA as well.

In terms of challenges, I guess, when I was looking back, I haven't faced any big challenges, but I would say I was one of few female engineers at my university, which I don't think will come as a shock. In the investment industry, I do feel it is slightly better, but still very male-dominated. This has actually led me in a more personal capacity to work with organisations like Young Women into Finance, where I act as a mentor. You get partnered with a mentee who is 17 years old when you first meet them, and you stay with them for two years of school and their three years of university, so a five-year scheme. The whole ethos of the group is to encourage more women to break into the finance industry and help them achieve work experiences and eventually, internships and graduate jobs to rebalance the finance industry in the UK.

JG: Thank you. That is a fantastic initiative, as you mentioned. Moving on to the markets, there's been a lot for investors to absorb given we're not even five months into the year yet. From an investment perspective, what has surprised you most about 2025 so far?

BM: I think it won't come as a surprise if I say 2025 has been dominated by uncertainty. [JG: It has]. It's a word that keeps coming up whenever we speak to prospective investors, and that's largely driven by all the tensions in the US.

I'm trying to be positive when I think about these things, and I do think there could be a positive for European infrastructure as more investors could see this as a good diversifier. The word ‘safe haven’ has definitely been dallied with as people look for something that's shockproof from the macroeconomic uncertainties that are existing in the world today. Hopefully, this will make European infrastructure, as I said, more in demand for US investors and even European investors themselves as they look to get their money away from the US. But it's definitely been a very uncertain and volatile environment in the first five months.

JG: It has. Sticking with the topic of energy infrastructure, it's often pitched as an attractive long-term allocation for investors looking to diversify into alternatives. Why do you think investors should consider an allocation?

BM: I think infrastructure is always characterised as long term, steady returns that are insulated from macroeconomic shocks. Why is that? I mean, these projects are large capital tickets and they have a long term view. Any short term changes in inflation or other volatile shocks are usually not counted into the return that you will get because these projects usually have a contractual aspect in their revenue stack, and they also have an aspect of inflation protection embedded within those contractual revenue structures. So, it is a good diversifier.

I would say in the UK, especially, there's definitely a trend to invest more and more towards infrastructure. I know there's still a bit of uncertainty around the Labour government's intention for what GB Energy will be. That being said, they are announcing that GB Energy will get £8.3 billion by 2029. So, there is an intention there for the public sector to incentivise investments in UK infrastructure, which again, I think will encourage investors - private investors - to invest alongside the public sector to get into infrastructure, especially as we're uncertain with more macro-style investments in the current state of play.

JG: Why should investors look at investment trusts above, say, low-cost passive funds?

BM: Investment trusts are a great way to invest directly into the infrastructure assets themselves, which I don't think the passive fund can do. As an example, our flagship fund, GCP Infrastructure Investments Limited, provides debt predominantly directly to infrastructure projects. So your money is directly linked to a wind farm as an example, or a solar farm. Whereas with a passive fund, you usually can't invest directly into an infrastructure asset due to liquidity issues.

The other positive I would say is that an investment trust can usually take a long term view with more ease because there aren't the requirements to keep rebalancing the portfolio if there are sales of shares.

Perhaps the third thing I would say is if you invest in an investment trust such as GCP Infrastructure Investments Limited, you're more likely to have a strategy that looks for being early movers or looks for new trends in new sectors. Whereas I've noticed that passive funds tend to follow trends as opposed to just starting into early sectors. Our flagship fund, GCP Infrastructure Investments Limited, has a really solid track record of being an early mover into more nascent energy infrastructure asset classes. We were one of the first investors into rooftop solar as an example, and one of the first in anaerobic digestion, batteries, and wood waste biomass. I think those are quite distinguished features versus passive funds.

JG: Yes, I think the investment trust structure suits this asset class, I think, particularly well. I think it's fair to say there's been quite a lot of scepticism about labels such as ESG and sustainability, as well as pushback in some quarters about net zero goals. What do you see as the future for responsible investment? And how does Gravis in particular, think about responsible investing?

BM: At Gravis, we have been investing in social and energy infrastructure for just over 15 years, and we have always intended to do that in a responsible way. We've been making ESG-focused investments before ESG was even a term that investors asked about. Our flagship fund, GCP Infrastructure, doesn't have a sustainable investment objective, so we're not using any of the SDR labels or similar. That being said, Gravis overall does have a responsible investment policy which excludes certain investments such as tobacco or animal testing companies or companies with persistent human rights. So, the ethos is always to invest with a responsible mindset.

At Gravis, we invested in things such as hospitals, schools, and other social infrastructure when we first started investing in 2010. That organically moved into the renewable energy sector just because we saw positive returns there. So we've been investing where we see the benefits as opposed to following ESG trends. I would say it's healthy to be sceptical about ESG and sustainability labels these days, as it does feel like a lot of funds are suddenly coming up with labels, and it feels a bit like a popularity contest at times. There have been incidents of greenwashing as well. But I do believe initiatives such as the EU's SFDR regime and the UK's SDR regime should lead to fund managers carefully considering applying any of these labels going forward, as the regulatory burden is going to be so high if you do apply one of these labels. So hopefully that can lead to less scepticism if you do apply a label, as you'll know that the disclosures you have to make are pretty robust.

JG: Thank you. Very interesting. Moving on to a slightly different topic. Do you think there's widespread resistance to private capital for public service provision, or is it unique to the UK? And given how stretched public finances, is more PPP inevitable, do you think?

BM: Well, I think if we take a step back, we need a really significant investment into infrastructure in the UK, and in other countries as well, to reach net zero goals. I don't think this can be achieved through public services alone. I do think we need private capital to work alongside public sector finance. I think it's very dependent on sectors. Certain sectors will need public support to encourage the private capital, as we did with solar energy as an example back in 2010, with initiatives such as the feed-in tariff.

As costs in these more nascent sectors come down over time, I think the public sector requirement will reduce, and potentially we could get into a scenario where you don't require the public backing anymore. However, with these more nascent industries today, for example, carbon capture and storage, which is still largely unproven at scale, I do think we will require some form of public support before private capital will even consider investing in these initiatives. I think to summarise, you need the public support to encourage investment into nascent sectors. I think that's been proven to be really successful in the UK with things such as solar and wind. But hopefully over time, these initiatives can dwindle down and eventually we can get to a business model which doesn't require the public sector backing anymore.

JG: Great. Thank you. I wanted to move on to valuation briefly. Given the valuation of infrastructure assets are based on a set of long-term assumptions, I wondered how these have changed since Donald Trump came into power?

BM: Looking at valuations of infrastructure assets, they're mostly dependent on long-term power prices, so the long-term power curves that you put into your valuation. And these have been falling due to reduced oil prices. So not quite driven by Trump at the moment - we can't blame him for that one, I'm afraid. So, in the last quarter to the 31st of March 2025, a large number of infrastructure funds did post a slight decrease in their valuation. This is because the power prices had reduced quite significantly due to falling oil prices. The things that have more of an impact from Trump are things such as short-term inflation changes, which do go into your valuation. However, these assets, as I mentioned, do have a long-term life, so 20 to 40 years, some of them. On a long-term basis, the inflation predictions are largely unchanged. I'd say those short-term impacts of things such as Trump policy changes aren't having a direct material impact on the valuation of infrastructure today.

JG: If you could challenge one misconception that investors might have about infrastructure trusts such as GCP, what would it be, do you think?

BM: I think looking at GCP infrastructure specifically, one thing that people misunderstand about the fund is that it is an infrastructure debt trust and not equity. Why I say that is we don't own the asset, so we have less control over them. We are more shockproof, as I mentioned, because we are usually first in the capital stack versus some equity structures. We might be in a mezzanine or subordinated position. However, it's a different risk profile to an equity fund.

The other thing I'd say about GCP infrastructure is that we do have a very diversified portfolio, which is often misunderstood. We aren't just a solar fund or wind fund. We have a very diversified portfolio, 60% of that is in renewable energy assets, but that 60% is very diversified. We have rooftop solar, commercial solar, onshore wind, anaerobic digestion, biomass, geothermal, hydro, to name just a few.

JG: Staying on the topic of diversification, obviously, we've got rising political risk at the moment. We've had election cycles, there's net zero policy shifts. How do you go about future proofing an infrastructure portfolio?

BM: I mean, my personal view is that future proofing infrastructure needs to consider sustainability, and you need to think about, can this infrastructure help us reach net zero? I know the term net zero has had a bit of scepticism in the recent news with the US. However, in Europe, everyone does still remain committed to reaching net zero by 2050 or earlier, as per the Paris Accord, and no one has rode back on that goal so far.

There has been a trend towards countries also wanting energy security to withstand any external politics, such as when Russia invaded Ukraine. This really did prove many countries' reliance on gas imports. I think the net zero goal plus the goal of energy security leads to targeting energy infrastructure that helps reach net zero and allows countries to be more self-sufficient.

At Gravis, when we consider building portfolios across all of our funds, we always think about how do we future proof these portfolios and avoid the risk of having stranded assets. Therefore, if we look at energy assets, we do tend to focus on infrastructure that helps us to reach net zero as we see these assets as having a longer term life with more attractive exit scenarios there as well.

JG: Looking ahead, what do you see as some of the key drivers of performance over the next few years, and how do you think the interest rate cycle might affect your portfolio?

BM: We are just coming through a period of high interest rates, which has really affected infrastructure funds. When the interest rates spiked, it made infrastructure investments look somewhat less attractive as why would you invest in infrastructure if you can get such a high return on potentially a risk-free - or some people's view of a risk-free - Gilt. It has been a really tricky time for infrastructure funds.

That being said, at present, we do seem to be in a period of interest rates reducing, which should be good for the infrastructure sector. This is a really key driver to promoting interest in the sector. What's good to remember also is that GCP Infrastructure is predominantly a debt portfolio. Therefore, a lot of the assets within that portfolio have contracted revenues which are inflation-linked. It's usually protected from these macroeconomic factors as well. I would lastly say that infrastructure does provide diversity to a portfolio, so you have an embedded protection against market shocks such as high interest rates or high inflation rates.

JG: Thank you. One final question, if we may. Looking across the broader infrastructure landscape, which parts of the market do you find most interesting at the moment?

BM: We are interested in assets with contractual revenue structures. These could be things such as district heating initiatives or potentially carbon capture and storage, which has a lot of contractual revenues within their stack. We [Gravis] also are looking at investments outside of the UK in Europe. We've got a large focus on anaerobic digestion in the Republic of Ireland. We are looking to take on that experience that we have from investing in the UK market and look at more nascent markets such as the Republic of Ireland and investing early there before our peers and hopefully secure some attractive risk-adjusted returns.

JG: Thank you. A really interesting insight into why investors should consider an allocation to this sector. On that note, many thanks for joining us today, Bianca.

BM: It's been a real pleasure. Thanks very much, Jo.

JG: If you'd like to read more market insights, please head over to the Kepler Trust intelligence website, and we hope you join us again next month for another episode of Market Matters.

Past performance is not a reliable indicator of future results. The value of investments can fall as well as rise, and you may get back less than you invested when you decide to sell your investments. It is strongly recommended that if you are a private investor, independent financial advice should be taken before making any investment or financial decision. Please be aware that there can be a time lag when we release podcasts, meaning time-sensitive information may no longer be accurate at the time of publication. Kepler Partners LLP has a relationship with some of the companies covered in this podcast, which may impair its objectivity. Kepler Partners LLP is authorised and regulated by the Financial Conduct Authority.

Important Information

This transcript has been prepared by Gravis Capital Management Limited (the "Investment Adviser“ or “Gravis”) and is for information purposes only. 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 of this transcript outside the UK should inform themselves of and observe any applicable legal or regulatory requirements in their jurisdiction and are treated as having represented that they are able to receive this transcript without contravention of any law or regulation in the jurisdiction in which they reside or conduct business.

This transcript should not be considered as a recommendation, invitation or inducement that any investor should subscribe for, dispose of or purchase any such securities or enter into any other transaction in the GCP Infrastructure Investments Ltd (the “Company”) or any other fund affiliated with Gravis.  The merits and suitability of any investment action in relation to securities should be considered carefully and involve, among other things, an assessment of the legal, tax, accounting, regulatory, financial, credit and other related aspects of such securities.

No undertaking, representation, warranty or other assurance, express or implied, is made or given by or on behalf of the Company, the Investment Adviser or any of their respective directors, officers, partners, employees, agents or advisers or any other person as to the accuracy or completeness of the information or opinions contained in this transcript and no responsibility or liability is accepted by any of them for any such information or opinions or for any errors, omissions, misstatements, negligence or otherwise for any other communication written or otherwise. In addition, neither the Company or the Investment Adviser undertake any obligation to update or to correct any inaccuracies which may become apparent. The information in this transcript is subject to updating, completion, revision, further verification and amendment without notice. Past performance is no guarantee of future performance.

Gravis Capital Management Ltd is authorised and regulated by the Financial Conduct Authority; registered in England and Wales No: 10471852 and its principal place of business is 24 Savile Row, London W1S 2ES.