Positive momentum continued in February as sharp declines in mid and long - dated gilt yields provided the impetus for alternative income securities to strengthen. The strategy recorded a 3.06% total return (C Accumulation GBP) with a significant majority of positions contributing positively to performance during the period. 

Specialist REITs edged higher with key exposures Tritax BigBox, Primary Health Properties and Target Healthcare each generating total returns in excess of 4% and positive trading updates helping to sustain momentum in BigBox and Target. However, REITs did not lead the portfolio as they had in January, and a greater breadth of contributions were evident from social infrastructure names including HICL Infrastructure (+5.99% in February) and International Public Partnerships (+7.31%), renewable energy generators Bluefield Solar (+12.12%) and NextEnergy Solar (+4.54%), and infrastructure lenders GCP Infrastructure (+3.38%) and Sequoia Economic Infrastructure (+6.03%).

Traditional equities continued to power ahead, and further gains were seen in National Grid (+12.68% in February and the Fund’s best individual performer), United Utilities (+11.71%), SSE (+11.02%) and Pennon (+9.79% ). On the 2nd March, both National Grid and SSE accepted Ofgem’s Final Determination on the financial framework for the RIIO-T3 regulatory period (ending March 2031) which is set to underpin record levels of investment into the UK’s electricity transmission grid.

3i Infrastructure was the only notable detractor as the shares dropped 3.49% following a write-down of its German fibre-optic business DNS:NET, representing 5.6% of NAV. Investors have been waiting to hear news around an anticipated sale of airport ground support equipment provider TCR and the DNS:NET impairment will likely offset much of any additional upside assuming a transaction occurs. Dividend coverage is expected to be unaffected since the German asset had not been contributing to cash income.

New positions were established in Kier Group and Renew Holdings. Both companies are exposed to infrastructure investment, renewal and maintenance spending and are well positioned to capture opportunities outlined by the UK’s 10-year Infrastructure Strategy. The two entities complement one another with Kier positioning itself as a strategic partner to the UK government and regulated industries and having capabilities to deliver through the full life cycle of a project. Meanwhile, Renew has a
greater focus on critical asset maintenance and renewal services with shorter project durations, and is a less capital-intensive enterprise. Each position contributes to the Fund’s income generation objective. 

Despite these additions, overall equity exposure continued to be sold down more broadly. A notable reduction in National Grid was actioned, alongside more modest sales of Pennon Group, Vodafone, SSE and United Utilities. Elsewhere, Sequoia Economic Infrastructure, HICL Infrastructure and GCP Infrastructure were reduced. As a result, the Fund closed the period with a good level of liquidity, which following a period of positive momentum in the sector, provides optionality around re-deployment into any market weakness. To this point, opportunistic additions were made to Greencoat UK Wind and The Renewable Infrastructure Group around their mid-February lows.