Future-proofing your portfolio with infrastructure

Infrastructure investing goes far beyond toll roads and airports. Shane Hurst, co-manager of the FTF ClearBridge Global Infrastructure Income fund, shares with the FundCalibre team how the essential assets powering our daily lives – from regulated water utilities in the UK to the electric grids supporting AI growth in the US – can provide powerful returns. He covers how global listed infrastructure can provide exposure to powerful themes like energy transition, reshoring and AI.

Why you should listen to the interview: If you’re looking for investments that combine stability, inflation protection, and exposure to some of the biggest global trends, this episode is for you.

This interview was recorded on 4 March 2025. Please note, answers are edited and condensed for clarity. To gain a fuller understanding and clearer context, please listen to the full interview.

Interview highlights:

Water utilities offering inflation protection

“UK water utilities have some of the best regulation in the world. I mean, most people in the UK obviously hate their water utility, which is fair enough because it obviously leads to higher and higher rates. But as an investor in those utilities, you have a huge amount of certainty. And the reason you do is because they’re absolutely essential to supplying water to a consumer. And they are monopoly assets.

“So what do they deliver for us as an investor? Their assets are growing at 6-10% per annum. Which if you think about a regulated asset, that means they literally take that investment, put it into an asset base, and you earn a regulated, very stable return off it. So that’s very attractive. And then importantly, for most investors, they deliver a dividend yield of over 5% growing at inflation. So you don’t have to do a lot to earn a reasonable return off of UK water assets. And our largest position in UK water utilities is Severn Trent.

“US water utilities really there are two main ones that are large enough for us to invest in because we need the liquidity to kind of move in and out of these companies. American Water is one of them and American Water is really interesting because unlike Severn Trent, that just really satisfies a specific area in the UK. American water really invests all around the country in all different jurisdictions. So it’s very much a diversified water utility. But nonetheless does demonstrate that same kind of growth in asset base, that same very attractive characteristic that all water utilities exhibit because they are essential services.”

Increasing pipeline exposure in the portfolio

“One area I didn’t mention but has really increased in our portfolio over the last year is pipelines. These are the pipelines, the long haul pipelines that will transport oil and gas. Now we only invest in regulated or contracted pipelines, but they are seeing a huge growth. And there’s kind of two main reasons.

“The first is because people thought gas as a transition fuel was gonna be short, right? I mean, they thought you could build out renewables and that could fill the gap. And clearly it can’t the way grids work, you need that stabilising factor. And so that has helped valuations. But the other area is, if you are seeing electricity growth in places like the US or around the world, the only thing people can build apart from renewables really in short time is gas fire generation, which means you have an increased demand for gas, gas infrastructure and that’s how it’s benefiting pipeline. So that’s another area of the portfolio that we think is very attractive right now.”

Infrastructure in a Trump era

“So let’s look at what Trump’s doing for infrastructure positive and negative. He will stimulate the US economy. He’s going to extend tax cuts. That’s a benefit for a regulated utility because their area then grows more and obviously they earn good returns off that they invest more, et cetera. He’s imposing tariffs left, right, and centre. Where do you want to be when that happens? Where you wanna be in the safety of a domestic regulated utility? So realistically, it’s some of the best places to be are in our assets.

“Now, the impact for us from the tariffs will be through our pipelines that I just talked about, where if you are gonna tax or if you’re gonna tariff oil coming in from Canada and 60% of your imports of oil come from Canada it means what’s likely going to happen is you as a consumer are just going to pay more at the pump when you fill your car up because of the tariffs. But that could be impacted.

“The final one, which most people kind of gravitate to is, doesn’t Trump hate renewable assets? And it’s a very nuanced answer. And the reason it’s nuanced is that he hates anything that is not important to his overall agenda. And some renewables are very important.

“He wants to be the leader in AI, Stargate, the $500 billion investment in AI infrastructure. How do you satisfy that growth in electricity demand? Well, it’s not gonna be through coal because everyone’s retiring coal in the US. Nuclear plants are about 20% of the US grid. But you take a step back and if you wanna build a new nuclear plant, it takes 15, 20 years. So you really only have kind of two big buckets. The first is renewables and the other is gas.

“Now, we talked about gas, but what does that mean for renewables? It means he needs to continue to incentivise renewables to be built because they’re pretty much the only things that can be built right now in that fast pace to satisfy that electricity demand.

“So when you take a step back, net net he’ll probably be a positive for the sector, which is a lot better than you can say for many other sectors.”

Conclusion: Infrastructure is so much more than bridges and tunnels. It’s the water you drink, the electricity powering your devices, and the pipelines fuelling global industry. As the world undergoes energy transition, digital transformation, and supply chain reshaping, infrastructure assets are at the centre of it all. This episode highlights how these essential services offer both stability and growth potential, making them a unique addition to investment portfolios.