Market commentary: Nov 2025

Investment news and performance

Performance wise, the year to the end of November was a game of two halves. In the first half returns for our client portfolios were subdued with negative returns from Australasian shares and infrastructure being offset by positive (albeit low) returns from international shares and fixed interest. In the second half, markets came alive with positive returns from all investment classes, and a standout performance from international equities. Gross annual returns ranged from 6.5% for our Conservative portfolios to 9.5% for Growth.

Investing in infrastructure

Infrastructure is one of the three pillars in a portfolio along with shares and fixed interest investments and includes electricity networks, ports, toll roads, airports, and other utilities. Infrastructure companies improve diversification against the volatility of share markets and generally have stable cashflows.

A lesser discussed - but powerful side to infrastructure investment - is access to long term and enduring trends.

Electrification

Electrification and rising demand for electricity together comprise one of the most prevalent trends in markets and the economy. Underlying this rise is the growing expectations for AI as a transformative technology. Should this play out, it will require immense energy consumption for data centres, powered by renewable energy generation.

How we get exposure to this trend

We view investment in regulated utilities as the best way to gain exposure to this trend while reducing the risks. Regulated utilities own electricity generation and transmission assets and operate under government contracts that allow them to earn an agreed rate of return on their capital expenditure (capex). This means earnings increase as capex increases. Regulated utilities are increasing their capex spend to build electricity generation to meet higher projected demand.

Renewable energy

Robust momentum in renewable energy investment is key to the electrification trend. While the breakneck pace of 2015 – 2024 has abated, the outlook is for ongoing solid growth in wind and solar generation. This reflects improving project economics and advances in technology. Renewable energy is an especially attractive option to meet some of the increased demand as it is relatively quick to bring online. This suggests that ongoing solid growth in renewable energy by regulated utilities should continue over the coming years.

Economic moat

Economic moat is the term used to describe the level of long-term protection against competition and immunity to price fluctuations. The economic moat for regulated utilities is regarded as relatively wide. Returns on capex are protected by regulation, cost increases can be passed on to the consumer, and electricity supply is necessary, literally ‘to keep the lights on’.

Infrastructure companies that are accessing long term endurable trends and have wide economic moats play an important role in a diversified portfolio.

Richard Grimes, CERTIFIED FINANCIAL PLANNER (CFP^CM), Director and Financial Adviser