Sequoia Economic Infrastructure Income Fund Limited (LON:SEQI) has announced its monthly NAV and portfolio update – March 2025.
The NAV per share for SEQI, the largest LSE listed infrastructure debt fund, decreased to 92.55 pence per share from the prior month’s NAV per share of 93.95 pence, representing a decrease of 1.40 pence per share.
| pence per share | |
| 28 February NAV | 93.95 |
| Interest income, net of expenses | 0.75 |
| Asset valuations, net of FX movements | -2.18 |
| Subscriptions / share buybacks | 0.03 |
| 31 March NAV | 92.55 |
The decline in the Company’s asset valuations during March 2025 was primarily due to adjustments to the assumptions made in relation to the recovery of a non-performing loan, this is discussed below. The portfolio pull-to-par, which is incremental to NAV as loans mature, has increased from 3.6 last month to 4.0 pence per share as of March 2025.
No expected material FX gains or losses as the portfolio is approximately 100% currency-hedged. However, the Company’s NAV may include unrealised short-term FX gains or losses, driven by differences in the valuation methodologies of its FX hedges and the underlying investments – such movements will typically reverse over time.
Well positioned to benefit from high interest rates; 59.4% of portfolio is in fixed rate investments as of March 2025.
Market Summary – March 2025
Tariff Impact & Geopolitical Analysis
| · | Recent tariff measures and trade policy shifts between the U.S. and the rest of the world have renewed volatility in international financial markets. With these geopolitical frictions and protectionist strategies back in focus, the Investment Adviser believes prolonged tariffs could pose a drag on global economic momentum and fuel inflationary pressures across the U.S., U.K., and Eurozone. |
| · | As of March 2025, 54.7% of the portfolio is invested in defensive sectors (renewables, digitalisation, utilities and accommodation). The Company’s investments in defensive sectors make it well-positioned to withstand economic downturns and inflationary pressures. The Investment Adviser remains cognisant of the emerging geopolitical risks and continues to monitor developments closely. |
Interest Rate Announcements and Inflation Data
| · | During March, the Federal Reserve and the Bank of England both held rates at 4.75% and 4.50%, respectively, while the European Central Bank reduced interest rates by 0.25% to 2.50%. Due to the ongoing sell-off in the financial markets, analysts expect central banks to ease monetary policy by reducing interest rates more than previously expected, with bond futures pricing in the likelihood of at least four more rate cuts by the Federal Reserve before the end of the year. |
| · | As of March 2025, the yield on 10-year U.S. Treasuries remained stable around 4.2% whilst yields on 10-year U.K. Gilts and German Bund trended up by 0.2% and 0.4%, to 4.7% and 2.7%, respectively. As such, the valuation of most of the Company’s fixed rate instruments decreased during the month due to increases in base rates and credit spreads. Following month-end, U.S. Treasury yields have shown increased volatility, mainly due to the ongoing trade war between the U.S. and China. |
| · | In the U.S., CPI inflation declined to 2.4% in March, from 2.8% in February. In the Eurozone, CPI inflation declined to 2.2% during March, from 2.3% in February. In the U.K., the most recent data on CPI inflation shows that it eased to 2.8% during February, from 3.0% in January. |
| · | The recent implementation of broad-based import tariffs is expected to have a short-term impact on inflation. While the immediate effect may be an uptick on consumer prices due to higher costs for imported goods, these pressures are likely to be temporary. Supply chains are likely to adjust over time, with businesses seeking alternative sources or passing on only partial cost increases. |
| · | As inflation gradually abates over time, the likelihood of future interest rate cuts increases, making alternative investments such as infrastructure more attractive when compared to liquid debt. While the pace and size of interest rate cuts will vary across the Company’s different investment jurisdictions, the general consensus remains one of declining interest rates throughout the year. |
Portfolio Update – March 2025
Revolving Credit Facility and Cash Holdings
| · | As of March 2025, the Company had drawn £56.9 million on its revolving credit facility (RCF) of £300.0 million and had cash of £34.9 million (inclusive of interest income), and undrawn investment commitments of £130.4 million. The Company’s pipeline of opportunities remains strong and further updates will be provided to shareholders once more investments are made during the next quarter. |
Portfolio Composition
| · | The Company’s invested portfolio consisted of 54 private debt investments and 5 infrastructure bonds, diversified across 8 sectors and 30 sub-sectors. |
| · | 59.9% of the portfolio comprised of senior secured loans ensuring defensive positioning. |
| · | It had an annualised yield-to-maturity (or yield-to-worst in the case of callable bonds) of 9.87% and a cash yield of 7.29% (excluding deposit accounts). |
| · | The weighted average portfolio life decreased marginally to 3.4 years. This short duration means that as loans mature, the Company can take advantage of higher yields in the current interest rate environment. |
| · | Private debt investments represented 90.8% of the total portfolio, allowing the Company to capture illiquidity yield premiums. |
| · | Sequoia Economic Infrastructure Income Fund’s invested portfolio currently consists of 40.6% floating rate investments and remains geographically diversified with 45.8% located across the U.S., 25.4% in the U.K. and 28.8% in Europe. |
Portfolio Highly Diversified by Sector and Size
Share Buybacks
| · | The Company bought back 3,458,721 of its ordinary shares at an average purchase price of 77.24 pence per share in March 2025. |
| · | The Company first started buying back shares in July 2022 and has bought back 213,177,062 ordinary shares as of 31 March 2025, with the buyback continuing into April 2025. This share repurchase activity by the Company continues to contribute positively to NAV accretion. |
New Investment Activity During March 2025
| · | A senior holdco loan facility for €14.4 million to Project Crystal Floating, a market leader in providing diagnostic imaging and radiotherapy services delivered via numerous operating clinics across Germany. The business is underpinned by a stable regulatory environment, the essentiality of such services in delivering high quality medical care and strong barriers to entry; |
| · | An additional senior loan for $18.5 million to Project Ocean II for the financing of a minority stake in the Floating Liquified Natural Gas (“FLNG”) asset; and |
| · | An additional €2.4 million of Exeltium S.A.S 9.4%12/2031 bonds, a utility services company that trades and distributes electricity to consumers in France. |
Investments Repaid During March 2025
| · | The Company received the final scheduled repayment from Salt Lake Potash, together with some small additional distributions, for a total of A$2.8 million (or £1.3 million). |
Non-performing Loans
Sequoia Economic Infrastructure Income Fund continues to work towards maximising recovery from the non-performing loans in the portfolio (equal to 2.3% of NAV):
| · A loan that is collateralized by a landmark US educational building was adversely impacted by government cuts which reduced the likelihood of finding new tenants. In March 2025, the Department of Government Efficiency (DOGE), under the leadership of Elon Musk within the Trump administration, announced plans to reduce the U.S. Department of Education’s workforce by approximately 50%, affecting around 2,200 employees. This development has had a material adverse impact on leasing negotiations with prospective tenants, as discussions with the borrower were paused, resulting in a delay to the anticipated lease-up timeline. The carrying value of the loan currently equals 0.4% of NAV and the markdown on this loan during March 2025 represents an overall decline of 1.3 pence per share. |
There are no further updates on the Company’s non-performing loans.
Top Holdings
Valuations are independently reviewed each month by PWC.
