Magellan Infrastructure quarterly update

Listed infrastructure has become more attractive because higher bond yields reduced share prices while the underlying assets continued to deliver expected cash flows.

• The quarter was shaped by high energy prices, the war in Iran and rising global bond yields; US 10-year Treasury yields rose from just under 4.5% to about 5.3%.
• Most infrastructure assets offer built-in inflation protection, since toll roads and many utilities can raise prices with inflation, although this protection is not universal.
• Political risks include US governor races, consumer opposition to data centres, French corporate tax proposals affecting Vinci and reduced nationalisation concerns in the UK.
• Tower companies including Crown Castle and Cellnex, along with motorway operators Vinci and Ferrovial, detracted because they are more sensitive to interest rates and inflation, while UK utilities contributed positively.
• The portfolio's defensive, monopolistic assets have limited exposure to the AI theme, and unchanged cash flows imply higher embedded returns after the fall in share prices.

Takeaway: The manager sees an attractive outlook for infrastructure, but investors should distinguish between assets with genuine inflation pass-through and those that remain vulnerable to rates, inflation and political intervention.