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Ninepoint Global Infrastructure Fund

Global Infrastructure Fund - June 2024
Key Takeaways
  • Ninepoint Global Infrastructure Fund had a YTD return of 8.07% up to June 30, compared to the MSCI World Core Infrastructure Index’s total return of 2.54%.
  • In June, the Fund generated a total return of -2.87% while the Index generated a total return of -1.53%.
  • Equity markets continued their recovery with the S&P 500 and NASDAQ reaching all-time highs, driven by gains in Information Technology, Consumer Discretionary, and Communication sectors.
  • Economic data, including the US PCE price index, supported the market's move higher, with the index aligning with expectations and easing inflation concerns.
  • Central banks began reducing interest rates, with the Bank of Canada and the European Central Bank both cutting rates, signaling potential easier monetary policy for the US as well.
  • The Fund is currently overweight the Industrials and Real Estate sectors, market weight the Energy sector and underweight the Utilities sector.
  • The Fund was concentrated in 28 positions, with the top 10 holdings accounting for approximately 42.2% of the fund. 21 out of our 28 holdings have announced a dividend increase, with an average hike of 14.9%.

Monthly Update

Year-to-date to June 30, the Ninepoint Global Infrastructure Fund generated a total return of 8.07% compared to the MSCI World Core Infrastructure Index, which generated a total return of 2.54%. For the month, the Fund generated a total return of -2.87% while the Index generated a total return of -1.53%.

Ninepoint Global Infrastructure Fund - Compounded Returns¹ As of June 30, 2024 (Series F NPP356) | Inception Date: September 1, 2011

1M

YTD

3M

6M

1YR

3YR

5YR

10YR

Inception

Fund

-2.9%

8.1%

1.2%

8.1%

12.5%

6.5%

7.7%

5.9%

7.5%

MSCI World Core Infrastructure NR (CAD)

-1.5%

2.5%

0.1%

2.5%

6.1%

4.0%

4.0%

7.6%

10.2%

The equity markets continued to recover from the pullback in April and posted another solid month of returns, with the S&P 500 and the NASDAQ hitting all-time highs. In terms of S&P 500 sector level performance, gains were led by the Information Technology, Consumer Discretionary and Communication sectors as US mega cap tech rallied.  Conversely, the Utilities, Materials and Energy sectors underperformed during the month. We are prepared for positive seasonality to play out through most of the month of July, before the summer doldrums kick in during August and September.

There was plenty of economic data to support the move higher and the release of the US PCE (again, the Fed’s preferred measure of inflation) on May 31 really set the tone for June.  The PCE price index increased 0.3% month-over-month (up 0.2% excluding food and energy) and increased 2.7% year-over-year (up 2.8% excluding food and energy). The data was in line with expectations, consistent with the prior month’s results (which alleviated fears regarding the uptick in inflation in the first quarter of the year) and aligned with the Fed’s forecasts according to their Summary of Economic projections.

Although the Fed has remained steadfast in suggesting that additional evidence and the passage of time is required before the first rate cut, we are perhaps only two or three FOMC meetings away from that announcement. In fact, on June 5, the Bank of Canada became the first of the G7 nations to reduce interest rates, cutting by 25 bps to 4.75%. The European Central Bank quickly followed with a cut of their own on June 6, lowering their key policy rates by 25 bps. Admittedly, the US economy seems to be in much better shape than either the Canadian or European economies, but easier monetary policy is just around the corner for the world’s largest economy.

Interestingly, the Fed’s most recent FOMC announcement fell on the same day as the CPI release, on June 12, which added some intrigue to the day. The inflation reading was clearly dovish, with the Consumer Price Index unchanged in May, on a seasonally adjusted basis, after rising 0.3% in April, and increased 3.3% on a year-over-year basis. The index for all items less food and energy rose just 0.2% in May, after rising 0.3% in April, and increased 3.4% on a year-over-year basis, again improving from the inflation data the prior month. 

That afternoon, it was unsurprising that the Fed did not make any changes to monetary policy but surprising that the FOMC’s Summary of Economic Projections indicated a reduction in the number of forecasted rate cuts in 2024 from three to just one. During the press conference, Chairman Powell faced several questions regarding whether the FOMC members had adjusted their forecasts to incorporate the new, more benign CPI data and what was required to gain more confidence that inflation was sustainably moving toward the Fed’s 2.0% target. We think that Chairman Powell struggled to find convincing arguments to support a more hawkish stance and, because many FOMC members still expect at least two interest rate cuts in 2024, we believe that two cuts are the most likely outcome by the end of the year.

Beyond monetary policy, a few other key developments impacted the financial markets around the world during the month of June. Although mostly ignored in North American, snap elections in France led to volatility in the European equity markets and spreads between French and German bonds blew out as the far-right National Rally (RN) party looked to win the first round of the country’s parliamentary election. However, since the most likely scenario is not an outright majority, future government policy is unlikely to change dramatically and some of the outsized moves have subsequently normalized.

North American investors were probably more interested in the US Presidential debate, which provided some eye-opening but at the same time hard to watch moments. Without commenting on either candidate’s performance, we would point out that Trump’s odds of winning the election have skyrocketed while Biden’s odds have plummeted, although the outcome is far from certain at this point. In response, “Trump-friendly” trades worked strongly over the next few days, for example rates rallied significantly due to the threat of massive fiscal spending and renewable energy-related equities came under pressure due to the threat of a repeal of fiscal support for the energy transition, including tax breaks. As we get closer to November, we expect volatility to pick up much like the 2016 and 2020 election years.

Finally, in keeping with political developments, Canadian investors experienced quite poor equity performance during the month, which we believe was directly related to changes in the capital gains inclusion rate put forth by the Federal Liberal government. The bump in the inclusion rate from 50% to 66.67% triggered investors to lock in capital gains and losses before the change became effective on June 25. Essentially, Canadian investors dumped equities for tax planning purposes irrespective of price or valuation.  The Financials, Energy and Real Estate sectors seemed to be particularly hard hit by the selling, but we expect that investors will rebuild these positions shortly now that the deadline for tax planning purposes has passed. If anything, we think that the temporary selloff has offered an interesting entry point for high-quality, Canadian-listed companies.

Looking forward, the Q2 earnings season should generally provide support for equities, with US mega cap equities still the place to be. According to FactSet, analysts are expecting the highest quarterly year-over-year earnings growth rate in more than two years at 8.8% with the Communication Services, Health Care, Information Technology and Energy sectors reporting the biggest growth. Our outlook for the equity markets is positive over the balance of the year but, as we’ve discussed previously, the path depends on two different scenarios. If we get fewer rate cuts than currently expected mega cap growth should continue to outperform but if we get more than two cuts, the rally should broaden as growth reaccelerates across other sectors.

However, we are mindful that some of the recent data suggest that the US economy may be slowing faster than anticipated by the Fed and that the US Presidential elections will create added uncertainty, which may make the path of returns over the rest of the year far less linear than the first half of 2024. Despite these concerns, we are continually searching for companies that are expected to post solid revenue, earnings and dividend growth but still trade at acceptable valuations today.

Top contributors to the year-to-date performance of the Ninepoint Global Infrastructure Fund by sector included Utilities (+541 bps), Energy (+319 bps) and Industrials (+239 bps), while top detractors by sector included Real Estate (-89 bps), Communication Services (-39 bps) and Information Technology (-19 bps) on an absolute basis.

On a relative basis, positive return contributions from the Industrials (+301 bps), Utilities (+249 bps) and Energy (+35 bps) sectors were offset by negative contributions from the Communication Services (-40 bps) and Information Technology (-20 bps) sectors.

Source: Ninepoint Partners

We are currently overweight the Industrials and Real Estate sectors, market weight the Energy sector and underweight the Utilities sector. As investors begin to assess the implications of the upcoming US Presidential election and the first interest rate cut of the cycle, we continue to expect broader participation in the equity rally. In the meantime, we remain focused on high quality, dividend paying infrastructure assets that have demonstrated the ability to consistently generate revenue and earnings growth through the business cycle.

We continue to believe that the clean energy transition will be one of the biggest investment themes for many years ahead. Therefore, we are comfortable having exposure to both traditional energy investments and renewable energy investments in the Ninepoint Global Infrastructure Fund given the importance of energy sustainability and security of supply around the world. Further, electricity demand is expected to accelerate dramatically, led data centers, manufacturing and transportation and we are looking to position the Fund to take advantage of this theme.

Sector Exposure
Source: Ninepoint Partners

The Ninepoint Global Infrastructure Fund was concentrated in 28 positions as at June 30, 2024 with the top 10 holdings accounting for approximately 42.2% of the fund. Over the prior fiscal year, 21 out of our 28 holdings have announced a dividend increase, with an average hike of 14.9% (median hike of 8.0%). Using a total infrastructure approach, we will continue to apply a disciplined investment process, balancing valuation, growth, and yield in an effort to generate solid risk-adjusted returns.

Jeffrey Sayer, CFA
Ninepoint Partners

Historical Commentary

View All
  • Ninepoint Global Infrastructure Fund
    Year-to-date to October 31, the Ninepoint Global Infrastructure Fund generated a total return of 24.00% compared to the MSCI World Core Infrastructure Index, which generated a total return of 15.84%. For the month, the Fund generated a total return of 2.02% while the Index generated a total return of 0.21%.
    Infrastructure
  • Ninepoint Global Infrastructure Fund
    Year-to-date to September 30, the Ninepoint Global Infrastructure Fund generated a total return of 21.54% compared to the MSCI World Core Infrastructure Index, which generated a total return of 15.60%. For the month, the Fund generated a total return of 4.97% while the Index generated a total return of 2.90%.
    Infrastructure
  • Ninepoint Global Infrastructure Fund
    Year-to-date to August 31, the Ninepoint Global Infrastructure Fund generated a total return of 15.79% compared to the MSCI World Core Infrastructure Index, which generated a total return of 12.34%. For the month, the Fund generated a total return of 1.73% while the Index generated a total return of 1.61%.
    Infrastructure
  • Ninepoint Global Infrastructure Fund
    Year-to-date to July 31, the Ninepoint Global Infrastructure Fund generated a total return of 13.83% compared to the MSCI World Core Infrastructure Index, which generated a total return of 10.56%. For the month, the Fund generated a total return of 5.32% while the Index generated a total return of 7.82%.
    Infrastructure
  • Ninepoint Global Infrastructure Fund
    Year-to-date to May 31, the Ninepoint Global Infrastructure Fund generated a total return of 11.26% compared to the MSCI World Core Infrastructure Index, which generated a total return of 4.13%. For the month, the Fund generated a total return of 6.11% while the Index generated a total return of 4.00%.
    Infrastructure
  • Ninepoint Global Infrastructure Fund
    Year-to-date to April 30, the Ninepoint Global Infrastructure Fund generated a total return of 4.86% compared to the MSCI World Core Infrastructure Index, which generated a total return of 0.12%. For the month, the Fund generated a total return of -1.79% while the Index generated a total return of -2.29%.
    Infrastructure
  • Ninepoint Global Infrastructure Fund
    Year-to-date to March 31, the Ninepoint Global Infrastructure Fund generated a total return of 6.77% compared to the MSCI World Core Infrastructure Index, which generated a total return of 2.44%. For the month, the Fund generated a total return of 4.10% while the Index generated a total return of 2.66%.
    Infrastructure
  • Global Infrastructure Fund
    Year-to-date to February 29, the Ninepoint Global Infrastructure Fund generated a total return of 2.57% compared to the MSCI World Core Infrastructure Index, which generated a total return of -0.22. For the month, the Fund generated a total return of 4.08% while the Index generated a total return of 1.66%.
    Infrastructure
  • Global Infrastructure Fund
    Year-to-date to January 31, the Ninepoint Global Infrastructure Fund generated a total return of -1.45% compared to the MSCI World Core Infrastructure Index, which generated a total return of -1.84%. The year 2024 has started off much like 2023 ended, with stocks in the Communication and Information Technology sectors continuing to rally.
    Infrastructure

All returns and fund details are a) based on Series F units; b) net of fees; c) annualized if period is greater than one year; d) as at 6/30/2024; e) 2011 annual returns are from 09/01/11 to 12/31/11. The index is 100% MSCI World Core Infrastructure NR (CAD) and is computed by Ninepoint Partners LP based on publicly available index information.

The Fund is generally exposed to the following risks: Capital depletion risk; Concentration risk; Credit risk; Currency risk; Cybersecurity risk; Derivatives risk; Exchange traded funds risk; Foreign investment risk; Income trust risk; Inflation risk; Interest rate risk; Liquidity risk; Market risk; Regulatory risk; Securities lending, repurchase and reverse purchase transactions risk; Series risk; Short selling risk; Small company risk; Specific issuer risk; Tax risk.

Ninepoint Partners LP is the investment manager to the Ninepoint Funds (collectively, the “Funds”). Commissions, trailing commissions, management fees, performance fees (if any), other charges and expenses all may be associated with mutual fund investments. Please read the prospectus carefully before investing. The indicated rate of return for series F units of the Fund for the period ended 6/30/2024 is based on the historical annual compounded total return including changes in unit value and reinvestment of all distributions and does not take into account sales, redemption, distribution or optional charges or income taxes payable by any unitholder that would have reduced returns.  Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. The information contained herein does not constitute an offer or solicitation by anyone in the United States or in any other jurisdiction in which such an offer or solicitation is not authorized or to any person to whom it is unlawful to make such an offer or solicitation. Prospective investors who are not resident in Canada should contact their financial advisor to determine whether securities of the Fund may be lawfully sold in their jurisdiction.

The opinions, estimates and projections (“information”) contained within this report are solely those of Ninepoint Partners LP and are subject to change without notice. Ninepoint Partners makes every effort to ensure that the information has been derived from sources believed to be reliable and accurate. However, Ninepoint Partners assumes no responsibility for any losses or damages, whether direct or indirect, which arise out of the use of this information. Ninepoint Partners is not under any obligation to update or keep current the information contained herein. The information should not be regarded by recipients as a substitute for the exercise of their own judgment. Please contact your own personal advisor on your particular circumstances.

Views expressed regarding a particular company, security, industry or market sector should not be considered an indication of trading intent of any investment funds managed by Ninepoint Partners. Any reference to a particular company is for illustrative purposes only and should not to be considered as investment advice or a recommendation to buy or sell nor should it be considered as an indication of how the portfolio of any investment fund managed by Ninepoint Partners is or will be invested.

Ninepoint Partners LP and/or its affiliates may collectively beneficially own/control 1% or more of any class of the equity securities of the issuers mentioned in this report. Ninepoint Partners LP and/or its affiliates may hold short position in any class of the equity securities of the issuers mentioned in this report. During the preceding 12 months, Ninepoint Partners LP and/or its affiliates may have received remuneration other than normal course investment advisory or trade execution services from the issuers mentioned in this report.