HICL Infrastructure: July 2026 update

• InfraRed Capital Partners, the trust’s manager, has over 25 years of experience in the industry.

• The trust has recently increased its long-term return target to 10% per year – not guaranteed

• The trust also aims to provide a resilient and growing income for investors over the long term – not guaranteed

• Compared to 2025, the trust’s net asset value (NAV) has risen by 4.6% and its discount to NAV has narrowed

How it fits in a portfolio

HICL Infrastructure plc aims to provide investors with a growing, resilient income over the long term, along with some capital growth. The company owns assets across a wide variety of sectors including transport, utilities and healthcare. Long term contracted revenues, often linked to inflation and heavily regulated, mean the company has very good income visibility which helps underpin the dividend - though of course no dividend is guaranteed.

The trust could diversify an income-focused investment portfolio, as well as provide some protection against inflation. Investors in investment trusts should be aware the trust can trade at a discount or a premium to its net asset value (NAV).

Manager

InfraRed Capital Partners, or InfraRed, is the investment manager for HICL Infrastructure plc. It’s responsible for the trust’s day-to-day management and has been investing in infrastructure since the late 1990s. Edward Hunt, Head of Core Income Funds, leads the InfraRed team and is supported by a team of over 160 infrastructure professionals.

As with any investment trust, there’s also a board that oversees the company management for its shareholders. With six members, the board has a broad range of financial and investment experience which should ensure it’s able to hold the trust managers to account.

Process

The trust invests in core infrastructure assets across the UK, North America, Europe, Australia and New Zealand.

Core infrastructure assets are essential to the operation of society, including water utilities, power transmission and transport links. These are often natural monopolies with very high barriers to entry. As a result, the amount you can charge for customers to use these assets is usually tightly regulated, but the contracts commonly include price increases that rise in line with inflation. Long contracts with predictable price increases provide a steady and reliable income, which underpins the trust’s dividend – though of course no dividend is guaranteed. The trust has recently increased its return target and now targets a total return of 10% a year over the long term – not guaranteed – through a combination of dividends and NAV growth.

The trust’s assets are currently split into two main buckets – income generation assets, made up primarily of Public-Private Partnerships (PPPs), and growth assets.

PPP projects see an investor fund a new bit of public infrastructure, like a school, hospital or road, and manage it for a set period in return for a regular fee. At the end of the period the asset is handed over to the public sector client. Because the contracts are fixed term and backed by the government, PPPs are generally considered lower-risk investments.

PPPs account for 62% of HICL’s portfolio. The largest PPP investment is the Royal School of Military Engineering, the trust’s 7^th biggest investment, accounting for 3.5% of their assets. HICL’s investment is for 30 years, covering over 50 buildings and five training facilities, with a total capital expenditure of £292 million.

The remainder of the portfolio is made up of growth assets. These are operating companies, usually with an indefinite life. They provide essential services that are generally less sensitive to the wider economic environment. These companies often have the potential to deploy more capital, with a larger asset base rewarded with greater allowed returns and a growing return to shareholders.

Within the trust’s growth assets there is a spectrum of economic sensitivity.

The trust’s largest holding, Affinity Water, supplies water to 3.9 million people in Southern and Eastern England and accounts for 13.6% of the portfolio. Given the importance of water supply and lack of competition the company is tightly regulated. The company is allowed to earn a set return on the capital it invests, and investments to grow the business are also controlled. Affinity has just started a new regulatory period, and expects to see its regulated capital value increase by 30% by 2030 – creating scope for considerable growth in distributions from the company over time.

At the other end of the spectrum is London St. Pancras High Speed, the high-speed rail line connecting St Pancras station with the Channel Tunnel. Its revenues are dependent on the volume of traffic on the line – and that is at least partly dependent on economic conditions – as well as shops and parking at the station itself. The asset accounts for 5.5% of the portfolio.

In July 2026 the trust announced that in future it expects to add higher returning “enhancer” investments. These will account for up to 20% of the portfolio and aim to increase exposure to long-term infrastructure megatrends. These are expected to help the trust achieve its longer term 10% total return target.

The trust completed two major asset sales in its last financial year. In August, the trust sold a £225m PPP portfolio, including stakes in Southmead, Pinderfields and Pontefract hospitals. It subsequently sold its 24% stake in the A63 motorway in France for £311 million – 21% ahead of the asset’s carrying value on the balance sheet. Those proceeds have helped the trust to reduce its net debt and buy back £100 million of shares. They have also funded an additional investment in Cross London Trains – the owner of 115 Class 700 trains for the Thameslink rail service. HICL invested another £51.8 million in the company.

The trust has the flexibility to use derivatives and gearing, both of which can magnify any gains or losses. Investors should be aware that if used, both can increase risk. As at the end of March the trust had not drawn its revolving credit facility (RCF) and had £150 million in outstanding private placement notes.

Culture

HICL Infrastructure plc launched in 2006 and was the first infrastructure investment company to be listed on the London Stock Exchange. The trust delegates the management of the trust to InfraRed Capital Partners, a specialist infrastructure manager with over 25 years experience managing core infrastructure assets.

InfraRed is owned by Canadian life insurer Sun Life Financial. It operates from offices in London, Madrid, Frankfurt, New York, Miami, Sydney and Seoul. InfraRed actively manages over 300 infrastructure projects, with $13bn under management in private and listed funds.

ESG integration

The managers aim to ensure each company they invest in takes responsibility for its environmental, social and governance (ESG) impacts, risks and opportunities. They want to see companies with a clear social purpose, with a desire to preserve the natural environment and mitigate the impacts of climate change, and the drive to benefit the communities where their infrastructure is located.

Infrastructure, as an asset class, is often naturally compatible with sustainable investing. HICL actively contributes to the United Nations Sustainable Development Goals through the delivery of reliable and resilient infrastructure that supports economic development and human wellbeing. They publish an annual sustainability report which can be found on their website.

Cost

The ongoing annual charge over the trust’s financial year to 31 March 2026 was 1.03%, slightly lower than the 1.10% figure for the previous year. Investors should refer to the latest annual reports and accounts, and Key Investor Information Document for details of the risks and charging structure.

The trust has recently changed the structure of its fee agreement with InfraRed. From July 2026 InfraRed’s management fee will be calculated by reference to the Company’s market cap. With the shares trading at a substantial discount to NAV recently this will have the effect of reducing the management fee.

The annual charge to hold investment trusts in the HL ISA, SIPP or Fund & Share Account is 0.35% (capped at £150 p.a. in each account) and 0.25% in the HL Lifetime ISA (capped at £45 p.a.). There are no charges from HL to hold investment trusts within the HL Junior ISA. As investment trusts trade like shares, both a buy and sell instruction will be subject to the HL share dealing charges.

Performance

Since the trust launched in March 2006, it's delivered good returns to investors, though there have been periods of volatility.

For example, the trust held up well during the Covid pandemic and delivered strong returns, owing primarily to the defensive nature of the infrastructure assets it invests in. However, it struggled between early 2023 and the middle of 2025 as rising interest rates hit the value of the trust’s assets. When bond yields rise, the value of future cash flows declines and that is particularly challenging for bond proxy investments like the infrastructure companies HICL invests in. Between February 2023 and July 2025 the trust’s NAV fell by 9.2%, with the total share price return of -9.1%.

More recently the trust saw NAV per share rise 4.6% to 160.2p in the 12 months to March 2026. That reflects the sale of the A63 motorway for a premium to book value, inflation exceeding forecast in the first half of the year and good results in the trust’s growth assets. That was partially offset by mark downs in the value of a handful of PPPs. The trust also paid dividends of 8.35p during the year. HICL continues to trade at a discount to NAV, around 15% at the time of writing.

The manager has announced that it plans to pay a dividend of 8.5p per share for the current financial year and 8.65p the year after. Over the long-term the trust aims to pay a growing dividend – though remember that no dividend is guaranteed.

While the income growth is lower than some peers, and below the Bank of England’s long-term inflation target, the managers want to keep it at an achievable level over the long-term. At the time of writing, the trust yields 6.3%, although yields are variable and not a reliable indicator of future returns.