In an environment marked by economic uncertainty, sticky inflation, and market volatility, infrastructure investments have reemerged as a compelling option for investors.

UK infrastructure is at a critical juncture and requires unprecedented levels of investment to replace ageing buildings in healthcare and education provision, to modernise energy transmission and distribution networks, advance digital services, and meet decarbonisation goals.

The government is supportive of private investment in such projects and that should provide opportunities for companies and projects operating in the sector. What’s more, 17 pension providers have signed the new Mansion House Accord, with the aim of allocating a total of 10% in private assets via DC pension funds by 2030. 5% of these investments will be in UK assets, which would more than double the current average allocation while giving the economy a £50bn cash injection.

Gravis has two options in this space: GCP Infrastructure Investments Ltd and the VT Gravis UK Infrastructure Income Fund. Both aim to deliver reliable and predictable income and returns from real, tangible assets that people use every day, no matter what the economic environment looks like.

Let’s start with GCP Infrastructure Investments Ltd. It’s a FTSE 250-listed, closed-ended investment company, and its focus is simple but powerful: lend money to UK infrastructure projects that have reliable, long-term revenue streams, often backed by public sector contracts. It invests in real assets such as schools, hospitals, and renewable energy projects. These are all critical infrastructure that keep functioning regardless of how the economy is performing.

Here’s why it’s worth a closer look:

• Predictable income: GCP Infrastructure Investments’ loans are typically secured against contracted cash flows backed by the UK public sector. Many of the loans are also structured to benefit from partial inflation protection, providing a hedge against rising prices. The Company has paid a dividend for 15 consecutive years*.
• Resilience in economic downturns: Because many of its projects are availability-based (in other words, they get paid as long as the service is available), they’re less exposed to demand fluctuations and economic cycles. The share price is down a modest 4% in the last year, and the Company is trading at a high 30% discount to the net asset value (NAV)**, suggesting it is undervalued.

• Attractive yield: The portfolio currently has a yield of 9.86%, which is well above the UK base rate of 4.25%**. Because the loans are typically government-backed, dividend payments are relatively safe.

The VT Gravis UK Infrastructure Income Fund is an open-ended investment company that invests in the UK-listed infrastructure sector across sectors like energy, transport, digital infrastructure, and utilities. It aims to provide regular income, preserve capital, and protect against inflation.

Here’s why it’s worth a closer look:

• Diversification: The Fund spreads its investments across a range of companies and infrastructure types, so it’s not overly reliant on any one sector or theme. Because infrastructure companies typically provide essential services, they may be considered defensive in nature and less sensitive to cyclical economic trends. These characteristics would likely prove attractive to investors looking for regular income and portfolio diversification benefits.

• Inflation-linked income: A significant portion of the Fund's income is derived from assets with cash flows linked to inflation, enhancing its appeal in periods of rising prices.

• Income focus: The Fund provides relatively high levels of income for investors, underpinned by the contracted nature of the cash flows generated by underlying portfolio companies. It pays income quarterly and is currently yielding around 6.5%***. Because at least 80% of the portfolio is invested in operational assets, that income has a stable foundation.

It really comes down to what your clients are looking for. Here’s a quick comparison:

Many companies that form part of the UK listed infrastructure sector presently trade on sizeable discounts to their net asset values. A re-rating of these companies such that share prices are more closely aligned with net asset values would drive attractive returns for investors. In the interim, the sector is highly income generative and distributes high levels of income, so investors are paid well to wait for capital upside.

Infrastructure may not always make for exciting headlines, but that’s exactly why it’s so appealing, especially in tough markets. Both GCP Infrastructure Investments Ltd and VT Gravis UK Infrastructure Income Fund, can play a key role in building more resilient, income-focused portfolios.

*As at 31 March 2025

**As at 13 May 2025

***As at 30 April 2025

Important information

This article is issued by Gravis Advisory Limited (“GAL”)), and Gravis Capital Management Limited (the "Investment Adviser“ or “GGCM”) and is for information purposes only. Both GAL and GCM are authorised and regulated by the Financial Conduct Authority and their registered office address is 24 Savile Row, London, United Kingdom, W1S 2ES.

VT Gravis UK Infrastructure Income Fund (the “Fund”) is a sub-fund of VT Gravis Funds ICVC, which is a UK UCITS scheme and an umbrella company for the purposes of the OEIC Regulations. Valu-Trac Investment Management Limited is the Authorised Corporate Director of VT Gravis Funds ICVC and GAL is the investment manager of the Fund.

Neither GAL nor GCM offer investment advice and this article should not be considered a recommendation, invitation or inducement to invest in a Fund, or 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. Prospective investors are recommended to seek professional advice before making a decision to invest. 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.

Any decision to invest in a 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.

Past performance is no guarantee of future performance.

Your capital is at risk and you may not get back the full amount invested. Prospective investors should consider the risks connected to an investment in a Fund or Company, which include (but are not limited to) counterparty risk, inflation and interest rate risk and volatility. Please see the Risk Factors section in the Prospectus for further information.

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 article 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 article is subject to updating, completion, revision, further verification and amendment 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.