Why Listed Infrastructure Deserves a Closer Look Right Now

Hello and welcome to the Investment Markets podcast, where we aim to discuss investment matters that impact the lives of self-directed investors. I'm your host, Darren Connolly, CEO at Investment Markets. And with me today is David Costello, Portfolio Manager for the Magellan Global Infrastructure Fund. David joined Magellan in 2015, and prior to that, he was with Ernst & Young and led their financial modeling practice in Brisbane. Today, we're going to be discussing investment matters relating to listed infrastructure. However, before we get into it, I need to remind you that this is general advice and general information only, and nothing in this podcast should be construed as an investment recommendation. As always, you will need to decide what is right for you. Welcome, David.

Thanks, Darren. It's great to be here with you.

Now, before we get started, David, and get stuck into infrastructure, can you tell me a little bit how you got interested in investments and why?

Of course, Darren. I like to think that there's a little bit of genetic encoding of capitalism and business in me. My maternal grandmother left school at 16 years of age to start her own business, and before businesses like Walgreens and Kroger, retailers like that, were experimenting with convenience offerings and expanding their product range to bring people to their stores, my grandmother was doing this in the early 1940s. And she was able to bootstrap that small business in regional Queensland into quite a large investment portfolio. And for me, that translated to a very keen interest in financial markets from a very early age. I was always fascinated with this idea that the tick on a stock price could create or destroy millions or billions of dollars of value. But my own forays into investing were a little bit less auspicious than my grandmother's. I recall at about 17 years of age, I'd finally accrued some savings having started to work. And I made my first few investments into some Australian stocks. I think my first purchase was Qantas. And frankly, I had no business investing directly in anything other than an index fund at that point. But the moment that really crystallized my passion for markets was in my first year of university when someone recommended to me a Ben Graham seminal book, The Intelligent Investor.

Another one.

And there were really two revelations that came out of that book that transformed the way I viewed markets. The first was this notion that when you buy a stock, you're not just taking a punt on the trajectory of the stock price, but you're buying an interest in a business. And that means that, of course, that business is susceptible to forensic analysis, to study of its competitive advantages, of its product offering and so on. And the second idea that transformed my view is a related one, Ben Graham's idea of Mr. Market. this manic depressive person who's prone to occasional bouts of euphoria and despair that will prompt him to offer you prices for securities that are vastly detached from underlying fundamentals. And that in that context, when you apply discipline, when you invest with a margin of safety, you can systemically generate significant wealth by exploiting Mr. Market's euphoria and despair.

So is it fair to say you feel that it's in your blood?

A little bit, yeah.

Well, that's good to know and hopefully your investors in the fund will also appreciate the background. So thanks, David. Now, infrastructure assets are usually considered defensive assets. So how can they build the resilience of a portfolio, in your opinion?

Certainly. Infrastructure investments are engaged in the provision of essential services. So they're inherently very resilient. Their durability is supported by imposing barriers to entry arising from characteristics like economies of scale, like physical network effects, like massive amounts of sunk capital. And often that means that they're subject to economic regulation that constrains their pricing or their rates of return. So very durable businesses in the long run. And because that underlying demand is so robust and predictable by virtue of those essential services that they're providing, their cash flows are extremely resilient, extremely predictable. And that confers infrastructure assets, three key characteristics that support the resilience of client portfolios. The first is that they're extremely defensive. You'll observe in down markets that infrastructure assets will tend to outperform amidst a flight to safety. Secondly, infrastructure assets by their very nature tend to embed inflation protected cash flows. So they preserve real purchasing power for investors. And finally, because infrastructure assets aren't subject to the economic cycle in the same way that other industrial or consumer businesses might be, they tend to exhibit low correlations with other asset classes, which makes them a particularly effective diversifier in client portfolios. So together, those attributes all hang together to make infrastructure investments particularly defensive and resilient in client portfolios.

But they will also have some benefit from some growth drivers and some tailwinds. What kind of drivers do you see sitting behind those types of assets?

Absolutely, Darren. This is, I think, a vastly underappreciated characteristic of infrastructure investments. I think infrastructure is all too often perceived as a low growth yield play bond proxy type investment. But I'd observe across our investment universe, we see profoundly powerful structural tailwinds supporting the structural growth in these assets. Nowhere are these more profound than in our electric utility investments. I'd suggest to you, Darren, that we're really embarking on the age of electricity. Electricity over the last decade has grown at the demand for electricity, has grown at twice the rate of overall energy demand. And as we look forward, it appears that electricity demand is poised to accelerate again. So the International Energy Agency, for instance, projects that electricity demand globally will grow by an amount broadly equivalent to the Japanese economy each year to 2030.

That's a huge amount.

It's an enormous amount. And of course, there are powerful tailwinds supporting that, both from decarbonisation which continues to be driven by economics as well as policy levers, notwithstanding Mr. Trump's skepticism towards decarbonization, but more recently by the re-emergence of load growth. You've seen in America, for instance, over the period to 2030, it's projected that AI and data centers will drive approximately half of projected growth in electricity demand. the average data center in the United States consumes as much electricity as 100,000 homes, and the largest of them are projected to use something like 20 times that, so as much as 2 million homes. So there's very profound tailwinds that support the investment required to build out the electric system and crucially under the regulatory construct every dollar of capital that the utilities invest into these businesses earns the authorised rate of return. So that impetus for investment is translating to increased cadence of earnings growth.

And are we likely to see those tailwinds in Australia as well?

They aren't as profound in Australia. Globally, the demand for data centers is projected to account for maybe 10% of the growth in electricity demand over the period of 2030, whereas I referenced the fact that it's up to half in the United States. But nevertheless, I still see powerful tailwinds to electrification in Australia, you know, whether it's the electrification of transport, building, industries, and of course, things like AI.

Yep. They're very, very powerful tailwinds that are supporting the asset class.

Absolutely.

Globally, in fact.

Absolutely. And shared by many of our other infrastructure sub-sectors too. When I look at our water utilities, their investment requirements are supported by increasingly stringent environmental standards, by the need to provide climate resilience. When I look at our airport assets, for instance, they benefit from profound tailwinds around the emergence of the middle class in the emerging markets, by the falling real price of air travel. in our communications assets, for instance, where Ericsson projects that data demand will grow at a compound annual growth rate of something like 19% to 2030. So again, across this ecosystem, extremely profound, enduring tailwinds that support the growth of the asset class.

Yeah, extremely profound and very powerful, David.

Indeed.

Now, the public versus private markets debate is often in the papers and one that's discussed by media quite frequently. What are the benefits in your opinion behind listed infrastructure assets as opposed to where those assets might be held privately?

I'm glad you raised this, Darren, because I feel like the private market proponents in this space have done a really good job in hammering home the message that the relatively lower observed volatility and the stability of performance of private assets is a real advantage. But I think there's scope for some nuance to be brought to this debate. I'd observe that in some respects, the relatively low observed volatility of unlisted infrastructure assets is in part just an artifact of not measuring the performance in those assets. They're valued quarterly, perhaps semi-annually, and they're marked to model rather than marked to market. You only find out what these things are really worth when you get a transaction.

So David, would I be correct in saying they may still be just as volatile, they're just not being assessed on a day-to-day, hour-to-hour basis?

I'd agree with that, and in fact, Cliff Asness, the founder of AQR Capital Management, has pointed out that there is in fact a cost to this. So by virtue of these attractive characteristics of low volatility of stability, that has bid up the prices for these assets, which comes at a cost to prospective returns. And I think the nuance here is that listed infrastructure can credibly contend with unlisted, but can also, for our institutional clients, form quite a nice complement to unlisted infrastructure. You know, we do observe, as Cliff Asness alluded to, that valuations in private markets tend to be significantly higher than those for listed assets for comparable quality characteristics. We sometimes observe these premiums for unlisted assets in the region of 20 to 50%, so they're meaningful and they do impact returns. But more broadly, there's a series of characteristics that unlisted infrastructure cannot replicate that we have in listed infrastructure. So for instance, we can provide investors with continuous liquidity and immediate access to deploy capital. By contrast, in private markets, if you're deploying into a private infrastructure fund, you only have the opportunities that are coming to market at that moment available to you. And it might take some period of time, often a couple of years, to deploy all of that capital. Now, of course, it's not earning a return while it's awaiting deployment. Secondly, in listed markets, we can provide comprehensive geographic and sectoral diversification. And there are a range of assets, most prominently US-regulated utilities, for instance, that are virtually only available in listed markets. By contrast, if we look at some of the private infrastructure vehicles, Here in Australia in particular, they tend to be dominated by airports, by energy networks, and by renewables. And then finally, of course, in the listed space, the price point tends to be a little bit more efficient. So to the extent that you're not necessarily getting a return that's superior in unlisted markets, the lower management fees of listed vehicles typically suggests that you're likely to achieve a better net outcome as an investor.

So I think that debate, David, will continue for many a year. There are obviously some benefits with both, but it's good to see the position of listed infrastructure assets being put forward. Now, are there any other misconceptions that you come across in your sort of day-to-day engagements with investors or other parties with regards to listed infrastructure?

I'd highlight two. I alluded to one earlier, this idea that infrastructure investments are just bond proxies, that they're devoid of meaningful growth. And as we described earlier, I actually see meaningful growth across our landscape. It's not uncommon, whether in toll roads, at the margin in some of our regulated utility investments, to see businesses guiding to low double digit growth in earnings per share. At the extreme, we have some of our water utility investments in the UK, for instance, expecting underlying earnings per share to double over the next three years or so. So infrastructure does deliver real structural growth. And just to highlight how significant that is, we've undertaken a study at Magellan where we looked at the performance of our core infrastructure strategy, our more diversified strategy, against the MSCI world, an asset that many people would regard as the gold standard of risk assets. And we looked at that since the inception of the core infrastructure strategy in December 2009. And over that period, the infrastructure strategy actually outperformed the MSCI world for much of that period. And while The headwind from rising rates in 2022 and 2023 has seen the infrastructure strategy just slightly slip behind the MSCI world. It's really nipping at its heels. And so for an asset that exhibits quite a benign risk profile, certainly relative to broader equities, we think that's a compelling evidence of real structural growth. The second misconception that I'd probably point to, and this is really important to us at Magellan, is the idea that anything that's engaged in the provision of essential services is an infrastructure asset. At Magellan, while we agree with the market that the provision of essential services is an indispensable characteristic of infrastructure, for us, it's only half of the story. In our mind, infrastructure is defined by its underlying investment characteristics, its ability to diversify, its defensiveness. And so we will exclude from our investment universe a lot of assets that the market would regard as infrastructure, things like competitive power generation assets where you earn the volatile wholesale energy price. They don't have that predictability of cash flow generation that supports defensiveness and diversification. Similarly, much of the North American midstream energy ecosystem, oil and gas pipelines. Again, we have no ideological objection to oil and gas pipelines. We do think you need to be mindful of energy transition risks around those assets. But the economics of many of these businesses means you're susceptible to volatility in the underlying commodity price. either expressly or sometimes tacitly because of the proximity of these assets to marginal wellheads. So that's, I think, two of the key misconceptions that I draw investors to and caution them to be careful about.

Thanks, David. That's pretty comprehensive. Now, the last couple of months, I've seen quite a lot of upheaval in markets. Our friend President Trump has been everywhere in the media, social, everywhere it seems. How do infrastructure assets perform in times like these? What are their characteristics?

Yeah, certainly. As I alluded to earlier, Darren, infrastructure is inherently very defensive and dramatically supports the diversification of investor portfolios. And so when uncertainty increases, when the economic outlook deteriorates, you tend to observe that infrastructure dramatically outperforms global equities. we've looked at what we describe as our drawdown analysis of the Magellan Infrastructure Fund since its inception. We study through this analysis, periods where the MSCI world declined by 5% or more. There's nothing magical about 5%. The analysis gives you the same inferences. If you look at 10%, 5% just gives you more events to study. And what you observe is that in these instances when markets come under pressure, the Magellan infrastructure fund has fallen on average by less than half of the fall in the MSCI world. Now, that certainly highlights the defensiveness of infrastructure, but there's a subtle nuance here that is even more powerful, which is that you can then separate these events into those where the market drawdown is led by rising interest rates, which tends to be more challenging conditions for infrastructure, not because it impacts the fundamentals, but because it tends to move the discount rate that the market applies to those cash flows. from those where the market drawdown is driven by a deteriorating economic outlook. And two key insights emerge from that regime analysis. The first is that overwhelmingly market drawdowns tend to be driven by a deteriorating economic outlook rather than by rising rates. Now in those conditions where the market outlook is deteriorating, infrastructure is even more defensive. On average in those events, which is approximately three quarters of the 16 events over that period, you see that the Magellan Infrastructure Fund drew down by approximately 37% of the fall in the MSCI world. significantly better than the 47% or so across the entire sample, which does of course tell you that rising rates means that drawdown tends to be closer to that of global equities in those scenarios. But that's not the scenario that you're seeing the vast majority of instances.

Okay, thank you, David. How do you manage all of these risks in the fund?

Yeah, it's a really important question and one that obviously exercises our mind a great deal. The first observation I'd make is that infrastructure assets are inherently very resilient. They generate these predictable underlying cash flows that you can really rely upon. And so unlike a lot of industrial or retail businesses, it's not a downturn in economic conditions that exercises our minds and keeps us up at night. You know, as Phil Fisher said, conservative investors sleep well. I tend to sleep pretty well most nights, aside from the fact that I have a 12-week-old baby at home. So the thing that does exercise our mind and that we do have to be vigilant to, I'll highlight three fundamental risks and then one market risk. Probably the most significant fundamental risk is agency risk. Infrastructure businesses, because of their profound competitive advantages, their predictable demand. particularly in certain infrastructure subsectors, things like toll roads, energy infrastructure, communications, because of their relatively modest incremental capital requirements, they're very cash flow generative. That cash flow generation creates scope for managers to engage in mischief. And so, if you think about infrastructure businesses, they exhibit all the properties that Warren Buffett alluded to when he said he tries to buy businesses so wonderful that an idiot could run them because one day one will. And he pejoratively referred to Coca-Cola's management team. I would suggest saying that a ham sandwich could run Coca-Cola. Now we're fortunate, Magellan, that the vast majority of the businesses we invest in have extremely capable executives running the business, whose interests are closely aligned to those of minority investors.

No ham sandwiches.

Fortunately, not too many ham sandwiches. But it is an area we do have to be vigilant to because that cash flow generation does create scope for managers to go and engage in empire building, to perhaps increase their personal prestige, justify a larger pay packet, or just to satisfy their thrill for a deal. Now, the way we manage that risk, of course, is we get very close to these companies. We understand the company's capital allocation framework. We understand how management thinks about the business. And we really prioritize where we can those businesses that have very strong organic pipelines of investment. That means the easy thing for management to do is just to continue to redeploy capital back into their core business at high rates of return. The second risk we need to be alert to, albeit I'd suggest this is often overstated for infrastructure assets, is leverage. Infrastructure assets, because they generate these predictable cash flows, can sustain high levels of debt financing. Now, of course, debt can be a useful tool in a business strategy. It enhances equity returns, it creates tax efficiencies, and it mitigates agency risks by instilling a degree of financial discipline.

But overleveraging also has its issues.

Exactly. You know, you push too far on leverage and you constrain financial flexibility. And in the extreme, you can even undermine those robust fundamentals and risk insolvency. And we saw this play out in the late 2000s. Some of your more seasoned listeners will appreciate this. You saw assets like the Lane Cove Tunnel backed by a private consortia of construction and infrastructure investors, assets like the Cross City Tunnel and in Brisbane Airport Link go under by virtue of a cocktail of optimistic traffic forecasts on a greenfield asset mixed with way too much leverage. So to manage that risk, we obviously monitor headline gearing ratios, things like net debt to EBITDA and funds from operations to net debt. But more subtly, this is an area we pay a lot of attention to in terms of the structure of debt books. So you're looking for high levels of fixed rate debt, for instance, because you don't want a scenario where rising interest rates reduces profitability because interest costs are going up on the balance sheet. Similarly, we look for a diversification of the tenor of the debt book, because when you get concentrated debt maturities, you render yourself vulnerable to a scenario where in a market crisis, capital markets freeze and liquidity creates an event of default. Now, as I briefly alluded to earlier, this is an area where infrastructure assets, particularly listed infrastructure assets, are incredibly robust these days. The balance sheets of our companies are absolute fortresses of strength for the most part. And so while we continue to monitor this, it's not an area that gives us a lot of stress. The final area of fundamental risk is sovereign risk. Now, again, because of their profitability, their cash flow generation and the fact that voters rub up against infrastructure assets, they can often be targets for policymakers who are looking for a piggy bank to fund some of their election spending promises. And so the manner in which we manage this risk is that we'll only deploy capital into jurisdictions where we can have a high degree of confidence that the rule of law and property rights will be protected. And in particular, we're looking for instances where the rights of private investors have been vindicated by the courts. So you see this again and again in the high quality developed jurisdictions, Australia, the United States, the UK. But including in some emerging markets, so places like Brazil have repeatedly reaffirmed the rights of investors. By contrast, there are other markets, albeit they have attractive fundamentals, places like China, where you just can't be confident that you're going to get a return on that capital in light of the risk of expropriation. So we've seen in China, for instance, a number of instances where the government has acted in a way that has breached concession contracts for private infrastructure businesses. And the management teams at those companies didn't even seek redress through the courts. There's no separation of powers in the sense that we understand that concept in Western democracies in an economy like China. So at Magellan, we just don't invest in those jurisdictions.

Okay, that makes sense. So reading between the lines and ignoring China and maybe tunnels, can you tell me the segments of the infrastructure market in general that you think are most appealing?

Yeah, I'll highlight one investment where we've had a large position in the fund for a little while now and then perhaps speak a little bit more obliquely to another area that we think is emerging as an important and attractive opportunity set. We're currently trading in a name in that space, so I'll need to be a little bit oblique lest I get a call from our risk and compliance team.

We definitely don't want that.

Indeed. So the area that I can speak very transparently about is for the last two years or so, we've had approximately 10% of the Magellan Infrastructure Fund invested in two UK water utilities, 7 Trent and United utilities. And this was really a powerful demonstration of Mr. Market that I alluded to earlier entering to one of his periods of despair. These assets are extremely high quality assets run by very capable management teams. and yet really confronted by challenges impacting an entirely unrelated unlisted infrastructure player, Thames Water, where very high levels of gearing, very poor operational performance and some management turmoil threatened the solvency of that business. In the third quarter of 2023, we saw Severn Trent and United Utilities, these listed peers, trade at a valuation equivalent to their regulatory capital value. Now, this is very unusual in listed markets. These assets would ordinarily trade at a premium to their regulatory capital value of 20%, 30%, sometimes 40%.

Were they all getting tarred with the same brush?

Well, they were in the public opinion, but the underlying fundamentals were grossly different. And just to highlight how unusual that scenario was, that they were trading at their regulatory capital value, the last time we observed this, the Corbyn labour opposition was proposing to nationalise the UK water sector. That issue wasn't in play here in 2023. So we did think this was an incredible valuation anomaly that presented some opportunities. And we viewed it very much as the market indiscriminately pricing risk because Severn Trent and United Utilities, as I alluded to, look nothing like Thames water. Thames Water was geared to 80% inside the regulatory ring fence and had virtually no equity because it would leave it up on top of the regulated entity. By contrast, Severn Trent and United Utilities were geared in line with the regulatory assumption at around 60% of value. Thames Water, four years into the last five-year regulatory period, had earned a cumulative real return on equity of 0.2%. So virtually no money for their shareholders.

That's not very good.

By contrast, over the full five-year period, we have results for the full five years for Severn Trent and United Utilities, not for Thames. Severn Trent more than doubled their baseline return on equity allowance, a total real return of about 9% per annum over that period. In nominal terms, I'd suggest somewhere in the region of 13.5%, 14.5%, whereas United Utilities generated a real return of 6%, total nominal return of 11.5%. These are very attractive returns on capital for a regulated utility with very low risk. And finally, Thames came under pressure for its environmental credentials, and yet Severn Trent and United Utilities are the best in class in this sector. And not only did we observe that Severn Trent and United Utilities looked nothing like the challenged Thames, But we observed that their growth outlook was improving dramatically. In 2021, the UK passed a series of environmental regulations that demanded dramatically increased investment in the sector. And we had a high degree of confidence that the regulator would approve that in their next regulatory determination. And of course, in December last year, we saw that view vindicated. We expected the cost of capital allowance to go up to reflect capital market conditions. We saw that expectation realized. And there were a number of sector and stock specific overhangs that have started to remove. So while that position delivered fairly modest returns through 2024, so far this year, we've seen those two stocks deliver very strong returns, particularly amidst the market uncertainty in March and April. So that's the first piece. We continue to expect very strong returns from those businesses. As I alluded to earlier, both of those businesses we'd expect earnings per share to double over the next three years or so. So very strong growth.

Are you going to keep the compliance team happy?

I will keep the compliance team happy on this one. The second opportunity that I'd allude to without mentioning a particular company is the opportunities that are arising where AI load growth and electrification is generating opportunities for regulated electric utilities, particularly in North America, to enhance their overall economics. So we're seeing this most prominently where it's driving likely earnings upgrades, where it's supporting customer affordability and enhancing credit metrics, and particularly in jurisdictions where that's coinciding with improving regulatory constructs. We think that presents a pretty compelling investment algorithm where you're likely to get accelerating earnings growth coupled with an improving multiple that delivers very compelling total shareholder returns.

That is quite a story. Now for investors who may be listening for the audience, how would you summarise the asset class? What makes it a compelling investment opportunity?

Well, Darren, I alluded earlier to the extreme defensiveness and diversification properties that infrastructure confers. So I'd suggest for most investors, a reasonable allocation to listed infrastructure is probably always a good idea. But when you reflect upon events in markets, particularly since Mr Trump took office in late January, I'd suggest now more than ever, investors need an allocation to infrastructure. If they already have one, they might like to consider a more prominent one. I mean, reflect on exactly what we've been through since January 20. At first, Mr. Trump was going to impose tariffs on Mexico and Canada, until he wasn't. And then we had tariffs on virtually the entire world, including, bizarrely, on some penguins in Heard and McDonald Island in the Antarctic. until we weren't.

And then... This is Taco Trump.

Indeed. And then Mr. Trump was going to sack Jay Powell, the chair of the US Federal Reserve, or too late as he's taken to calling him, until he wasn't. Disturbingly, he said that he's not sure he needs to uphold the US Constitution. And so, of course, we saw post the announcement of the Liberation Day tariffs in April, the market really become quite concerned about a deteriorating economic outlook wrought by all this uncertainty. Now, since then, of course, we've seen some exuberance return to markets precisely because of the taco Trump always chickens out trade that you alluded to and because we saw some frameworks for trade deals between the United States and the UK and China, respectively. But I'd suggest that the risks remain very prominent here at this juncture in the market. Certainly the risks are more elevated than the period at which Mr Trump took office. And yet if you reflect upon the MSCI world, it's just continued to grind higher over this period. Meanwhile, the investor sentiment, consumer sentiment, the University of Michigan Consumer Sentiment Index, for instance, is near all time lows. It's below levels we saw prior to the 1990 recession. You have business confidence, according to our discussions with investment companies in our global portfolio deteriorating. And there's been lots of talk of pauses in investment that will ultimately flow through to economic results. There's certainly a chance that with trade deals and the taco trade that we'll muddle through this and Mr. Trump will land the plane and the economy will continue to grow. But the risks are very prominent here. And so I'd suggest that an allocation to infrastructure for its defensiveness, for its diversification is very prudent at this juncture. Now, of course, the other consideration to reflect upon, I alluded earlier to the idea that rising real interest rates tend to be detrimental to the market performance of infrastructure. And the important thing to note here is certainly Mr. Trump's trade policies may impose some inflation. But the important thing to note is that base rates are much higher than in 2022 and 2023 when we saw rising rates pose a real headwind to the performance of infrastructure. In 2021, rates were at 1% in terms of the 10-year US Treasury yield. By contrast, by the end of 2023 in October, rates had reached 5% nearly. So even if we do see some further inflation from here, I'd suggest rates are going to 6% or 7%. They're not going to 9% or 10%. And so that incremental headwind will not be nearly as severe as we saw in the last rate rise cycle. And so you're more likely to see the underlying fundamentals, that robust growth that I alluded to earlier, shine through in this cycle than you did during the last rate rising cycle. So even if we do get that environment, I think infrastructure will perform in a resilient and robust fashion.

There's certainly a lot of geopolitical uncertainty at the moment, David. I think we can all appreciate that and where it goes from here. I'm not sure even Trump knows.

Of course, yeah.

Now just finally, maybe just turning back to yourself, the most important investment lesson you've learned in your career so far? Can you give us a little bit of an insight into that?

Yeah, certainly. I think for me, it's a lesson that both investment markets and my children have been trying desperately to teach me for a little while now, and that's patience. But I think the important and subtle distinction is that in investment markets, it pays to be patient, but you have to be patient with a high degree of introspection. I alluded earlier to the notion that during 2024 in particular, that notwithstanding our conviction in the opportunity behind some of these UK water utilities, they delivered pretty benign returns over that period, even as we saw the underlying fundamentals validate our expectations and reaffirm our thesis. So, Patience has been rewarded so far this year, but you can't just blindly stick your head in the sand and assume you're right because there's lots of smart people in markets and sometimes you do get it wrong. So it's patience coupled with continually challenging yourself, continually examining your investment theses from different perspectives and seeing where you could be wrong.

Yeah. Well, I think patience, they say patience is a virtue, David. Thank you very much for your insights and contribution today. That's been illuminating and I hope that's been illuminating for our audience also.

It's been an absolute pleasure. Thanks, Darren.

Thanks everyone for listening. For more insights like this and to search, find, and compare hundreds of investment products like the Magellan Global Infrastructure Fund all in the one place for free, go to investmentmarkets.com.au.