In the initial quarter of 2026, the Global Infrastructure Income Strategy demonstrated strong performance, surpassing global equities. This outperformance was primarily driven by a significant market rotation into more defensive sectors, fueled by a sell-off in software stocks. Additionally, escalating geopolitical tensions in Iran heightened inflation fears, prompting investors to seek safe-haven assets. Natural gas utilities and pipelines emerged as leaders within the listed infrastructure universe, contributing significantly to the strategy's robust returns. Renewable energy assets and utilities in North America and Europe also delivered solid gains, benefiting from increased capital expenditure (capex) needs to support growing power demand, evolving generation mixes, and modernization programs aimed at enhancing asset resilience.

During the first quarter of 2026, the listed infrastructure sector showcased remarkable resilience, outpacing global equities. This was largely attributable to a pronounced shift in market sentiment, as investors moved away from growth-oriented software stocks towards more stable, defensive assets. The conflict in Iran further exacerbated inflation concerns, driving a flight to safety and highlighting the inherent stability of infrastructure investments. Within this landscape, natural gas utilities and pipelines were star performers, demonstrating strong returns. Renewables and utilities across North America and Europe also contributed positively, buoyed by the necessity for substantial capital investment to meet surging electricity demand, adapt to changing energy sources, and upgrade existing infrastructure for improved durability. Even sectors sensitive to economic cycles, such as toll roads, airports, and railways, maintained their gains, with North American freight railways benefiting from an improving economic outlook, as indicated by the Purchasing Managers Index entering an expansionary phase for the first time in three years.

In Europe, the period saw notable merger and acquisition activities, exemplified by French electric utility Engie's acquisition of UK Electric Networks. Concurrently, several airport operators commenced negotiations for revised airport charges for their upcoming regulatory cycles. These companies proposed substantial increases in investments to accommodate anticipated traffic growth across their facilities. The intensification of military hostilities involving Iran in March led to considerable disruptions in critical energy and commodity markets, including oil and liquefied natural gas (LNG), impacting global supply chains. This geopolitical event reignited inflationary pressures worldwide, as elevated costs for energy, transportation, and raw materials permeated various industries.

The impact of these commodity market disruptions was evident in the sector's performance during March. Natural gas utilities and pipelines continued their strong trajectory, while North American and European utilities, despite a modest decline, still outperformed broader infrastructure indexes and global equities. Conversely, economically sensitive assets like toll roads, airports, and railways lagged, primarily due to heightened anxieties regarding inflation, consumer spending, and the overarching economic climate.

From a geographical standpoint, the U.S. and Canada region emerged as the primary contributor to the strategy's performance during the quarter. U.S. electric utility Entergy was a standout performer, with its share price rising after announcing an increase in capital expenditure and an uptick in data center-related agreements. Similarly, UK electric utility SSE, headquartered in Scotland and the largest renewable energy generator in the UK, performed well as funding uncertainties subsided and concerns about the UK's macroeconomic environment eased. On the other hand, French airport operator Aeroports de Paris and U.S. electric utility Constellation Energy were the largest detractors. Aeroports de Paris faced market disappointment due to an unfavorable outcome in its aeronautical tariff filing for 2026, which was seen as a negative indicator for future tariff periods. Despite this, management remains confident in achieving a more balanced outcome, supported by strong stakeholder engagement. Constellation Energy, a major nuclear generation company and the largest producer of carbon-free electricity in the U.S., saw its share price decline following calls for emergency electricity auctions at PJM Interconnection, signaling increased future capacity.

Throughout the quarter, new positions were initiated, including investments in Mexican airport operator Grupo Aeropuertos Del Sureste, anticipating continued traffic resilience despite new competition, and Canadian energy infrastructure firm Pembina Pipeline, with expectations of increased EBITDA driven by AI-related projects. French rail operator Getlink was also added to the portfolio, following its announcement of a new dividend policy promising a nearly 40% increase and a commitment to annual increases through 2030. The strategy divested from four positions, capitalizing on prior outperformance in U.S. rail operator Union Pacific and Canadian electric utility Emera. Exits from Spanish electric utilities Redeia and Iberdrola were also executed, with the former due to revised growth expectations and the latter to pursue more attractive opportunities within the European utility sector, such as Engie.

Looking ahead, infrastructure assets are expected to maintain their resilience, underpinned by regulatory frameworks and long-term contracts that facilitate the pass-through of inflation and cost increases to consumers. This characteristic offers crucial inflation protection amidst geopolitical commodity shocks. The market's increasing recognition of real assets' inflation-hedging capabilities in the current economic landscape further supports this outlook. The strategy projects low double-digit internal rates of return over the next five years, driven by stable dividend profiles and growth prospects. An accelerated infrastructure investment cycle, propelled by rising mobility demands, evolving energy needs, and the modernization of networks for enhanced resilience, is anticipated to sustain robust earnings and dividend growth for investors.