ASGI Fund Update - May 2025

In this episode, Josh Duitz, Aberdeen's Head of Global Infrastructure and a Portfolio Manager for ASGI joins Mike Taggart to discuss ASGI and the private infrastructure side of the fund. 

Transcript

Mike Taggart: Welcome to the latest podcast for the Aberdeen Global Infrastructure Income Fund, ticker symbol ASGI. I'm Mike Taggart, Aberdeen's Head of Closed-end Fund Investor Relations. With me is Josh Duitz, Aberdeen's Head of Global Infrastructure and a Portfolio Manager for ASGI. Josh, thank you for taking the time to discuss the fund today. 

Josh Duitz: Thanks for having me, Mike. Pleasure to be here.

Mike Taggart: So ASGI will have its five-year anniversary of its IPO in July. You've been a portfolio manager on an infrastructure mutual fund for 16 years. I know you're passionate about the space. What makes infrastructure so compelling? 

Josh Duitz: Mike, that's an absolute great place to start because there's so many things that make infrastructure compelling right now. Let me address this in two parts right.

Let's first talk about the attributes of infrastructure which stand through time. And then let's talk about the current tailwinds for the sector. The first on the attributes is resilience. Infrastructure assets, some of them are like utilities or toll roads and cellular towers, provide essential services which give them stable, predictable, inflation protected long-term cash flows. That's incredibly attractive in a world grappling with geopolitical uncertainty, inflationary pressures and slower global growth.

 The second part of it is relevance. Infrastructure is at the heart of today's most powerful investment themes, whether it's energy transition, digital connectivity or adapting to climate change and urbanization-  infrastructure is enabler. The capital investment needed to decarbonize and electrify alone is in the trillions of dollars globally. If I could go into a bit more detail about one of these themes, although we could probably do a podcast on each separate theme.

 So we are right now in the midst of one of the most significant leaps in innovation in decades, driven by artificial intelligence. And historically, infrastructure has always been the bedrock of innovation, just as it underpinned industrial and technological revolutions and may be essential for the next wave of transformation. What we're seeing now is two energy mega themes are converging the energy transition and electricity demand is accelerating due to data growth reshoring and the EV transition and fuel switching to renewables.

 We've had two decades of basically zero growth of energy in the US, and in Europe, it's actually declined by 15% over the last ten years. The core of this increased demand stems from the widespread use of graphic processing units, or GPUs, in data centers. GPUs are essential for AI, machine learning, and high performance computing. It consumes significantly more power than the traditional CPUs, 3 to 4 times as much energy as a CPU.

 A ChatGPT surge consumes nearly ten x as much electricity than the typical Google search. And how is it affecting our portfolio companies? We're seeing many of them sign in long term power purchase agreements tied directly to AI driven demand. Large tech companies are locking in renewable energy contracts years in advance, and there's a major acceleration in grid expansion, power supply planning and edge compute and buildout.

The infrastructure behind AI is no longer theoretical. It's being built now, and investors are starting to see the benefits. On a trailing 12 month basis, corporate solar PPAs (power purchase issuances) is running at 40% higher than the prior 12 months. And that's to April 30th. Year to date, we see about 57% of those solar PPAs being signed with hyperscalers such as Amazon, Meta and Microsoft.

So we really think investing in infrastructure right now is ideal time.

Mike Taggart: You know, that's really interesting because I think a lot of times when people think of infrastructure, they think of roads, you know, that sort of thing. Right. And then so thanks for, you know, pointing out that it's also an energy infrastructure is a big component of infrastructure in general and specifically of ASGI.

There are sounds like there's certainly a lot of tailwinds for infrastructure. One of the key features of ASGI is its ability to invest in private equity, private companies that would otherwise be unavailable to most investors. Would you please discuss that process of how you invest in those sorts of companies, and how such investments affect the fund? 

Josh Duitz: Yeah, I agree. One of the unique features of ASGI is that private investment. So, Eric Purington and I intend who handles the private investment. We work extremely close together. Whenever the team identifies an infrastructure opportunity on the private side, we discuss it in the very early stages of the investment process. We want to make the public and private investments work together, kind of like putting a puzzle together.

So what we do is we're looking for private investment opportunities. That, number one, either we don't have that opportunity set on the public side or that it's a discounted valuation to public markets. We've seen many private investors invest in infrastructure assets at premiums to where they trade in the public markets and as infrastructure investors that doesn't make sense to us. We believe this should be illiquidity discount when buying a private asset rather than a premium to work and really close together from the early stages and identifying unique opportunities. And really, this allows retail investors the opportunity to invest in private infrastructure alongside institutional investors. 

Mike Taggart: Yeah. Excellent. And then this is a term fund. So how will that termination date affect the private equity investments?

Josh Duitz: Yeah. So there's approximately ten years or so left on this term fund. Generally are private investments historically are investments that Eric has done have lasted 5 to 7 years. So we're still in the investment process for the private investors as we get closer to the end of the life of the term fund, that will start winding down on private investments. But we're still definitely in the investment phase of the process. 

Mike Taggart: Excellent. So big picture. There are several tailwinds for infrastructure in general. ASGI can invest in both public and private equities and it's a term fund. So two part question here to keep things fair and balanced. First, we've discussed tailwinds. Where have you been facing the strongest headwinds? And second, where are you finding the most attractive opportunities. Is there a certain sector or a certain geography, right now, that looks compelling. 

Josh Duitz: Yeah. So let's start with the first question. So what are some of the headwinds? And certainly we've seen it on the political side. When President Trump was elected on a potential rollback of the IRA. And that's something that that's the question. 

Mike Taggart:  That's the Inflation Reduction Act. 

Josh Duitz: Yep. It is. So thank you for clarifying that. So that has been a headwind this year or earlier this year, I should say, even since President Trump was elected. But what we've seen more recently, in fact, just last week, on May 12th, the House Republicans introduced a draft reconciliation bill, which is the first attempt at modifying the democratically led IRA, or Inflation Reduction Act, and it's renewable tax credits and incentives, including the PTC (production tax credits) and the investment tax credits, (ITC) and the transferability clause.

Specifically, the draft calls for a project to get 100% tax credits as long as certain criteria are met through 2028, and then dropped the 80% from 2029 and afterwards. So we're actually seeing it again. This is just a draft bill, but actually the draft bill itself looks better than previous expectations for renewables. So that's one thing that we face. And I would say always for infrastructure, some of that possible headwinds are if we see higher real interest rates at higher interest rates, but real interest rates, because many of the assets we invest in are inflation protected. So if we had higher interest rates because of high inflation, there's an offset to that. So that would be the other headwind that we would face.

I would say now in terms of the second question, then where are you finding the most attractive opportunities? I actually think this is interesting because we, you know, some some of the growth drivers for infrastructure include urbanization and population growth. The majority of the population growth that's happening over the next several decades is happening in an emerging markets and developing markets and in developing markets. We've always wanted to invest, but we really haven't had the investment opportunities. We have seen more recently, we've seen the opportunity to invest in tower companies in developing markets. And we think that's really unique because there's a tremendous amount of data growth. We're going from 4G to 5G here in the United States, in the developed markets, it's still going from 3G to 4G, and they're going to need more towers and denser towers. And we think that's a great opportunity. And we've seen valuations that are quite attractive. 

So I would say that geographically, and the opportunities that and just to be clear, we will never invest in a company just for a thematic. We really have to like the bottom-up fundamentals. But really when the top down and bottom-up meet, we have some of our best investment returns. And we think this is a great opportunity here because it's only top down and bottom up.

 Mike Taggart:  Nice. Well, finally, why should investors, consider putting money to work in infrastructure right now? 

Josh Duitz:  As you mentioned earlier, I've been investing in infrastructure, and we have an open-end infrastructure fund, AIAFX, for over 16 years, and I'm more excited about the tailwinds for infrastructure today than at any point since I started investing.

The combination of inflection in energy demand, which we talked about earlier for the energy transition data growth, which we briefly mentioned as we move from 4G to 5G, population growth and urbanization, specifically in emerging and developed markets, make infrastructure very compelling opportunity right now. Listed infrastructure valuations are still attractive relative to history, especially given the visibility of cash flows, inflation protection they offer.

In addition, many of the infrastructure companies that we invest in don't face a tariff issue that other companies have. We also think the closed-end fund vehicle that we manage, ASGI offers retail investors opportunity investment, both public and private infrastructure. We think being able to invest in both public and private infrastructure with governments priorities and energy, digital and transportation investments and the private sector demand picking up, we think infrastructure is well-positioned to benefit from both defensive and growth dynamics for large, long-term investors. It's an asset class that offers resilience and relevance in today's uncertain macro environment. 

Mike Taggart:  Great. Well, thank you, Josh, for that informative update. 

Josh Duitz:  Thanks for having me, Mike. 

Mike Taggart:  There are three convenient ways to learn more about ASGI. First, you can visit our website at Aberdeen investment.com. Second, you can email us at InvestorRelations@aberdeenplc.com or give us a call at 1-800-522-5465.

I am Mike Taggart of Aberdeen. Thank you for listening.

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