Hello, I'm Nina Liu, Portfolio Specialist for the Principal Listed Real Asset Strategies. Today we'll focus on answering a key question. Is now a good time to be adding global listed infrastructure, or GLI exposure, in your portfolio? We've already seen that recent shifts in equity market leadership have begun to benefit infrastructure stocks. In addition, structural growth drivers, such as the link between rising power demand and generative AI, has been beneficial for these companies.

Our view is that compelling relative valuations and the start of monetary easing in most major economies can support GLI's further out performance from here. While a soft landing remains the consensus call, the reality is recession risk remains elevated by historical standards, and current valuations likely mean broader global equities will be vulnerable to negative economic surprises, particularly if we see surprises that indicate further cooling in the U.S. labor market.

Today, infrastructure stocks are still quite cheap, trading at valuation levels relative to equities that are lower today than even during the global financial crisis. Given ongoing macroeconomic uncertainty, we think this translates into an opportunity to add some defensive equity exposure to your portfolio at an attractive price.

How defensive should we expect GLI to be? Due to the essential nature of the services infrastructure companies provide, the highly contracted or regulated revenue streams that asset class offers, we would expect business fundamentals to remain resilient through an economic slowdown. GLI has shown its defensiveness through favorable relative performance versus equities when averaging the five largest global equity market drawdown periods over the past few decades.

If you're not feeling compelled to add defense to your portfolio just yet, remember that the long term case for an active listed infrastructure allocation remains robust. GLI has delivered comparable returns to global equities at lower volatility, for decades, all while providing the capital appreciation and income growth potential that fixed income lacks. Simply adding GLI into a traditional 60/40 portfolio, by substituting a portion of global equities, holds the potential to provide similar returns while lowering overall portfolio risk.

In addition, GLI is one area of the public equity markets where investors have historically been rewarded for pursuing active management. We believe our specialist listed infrastructure team at Principal has the experience and skill required to identify and capture opportunities to deliver compelling excess returns, as we have done since the inception of our strategy.

If you'd like to connect with us about adding exposure to global listed infrastructure today, please reach out to your Principal contact. We look forward to speaking with you.