A sector’s golden era + 2 growth stocks your AI forgot to mention

An extraordinary surge in electricity demand - the biggest in decades - is being fuelled by the AI revolution, advanced manufacturing, and the energy transition.

According to Resolution Capital’s Andrew Parsons and Sarah Lau, electricity utilities are now supercharging the infrastructure sector.

Infrastructure has always been known as the quiet achiever in portfolios: reliable cash flows, low volatility, inflation protection. But decades of underinvestment are now colliding with unprecedented demand.

“Global listed infrastructure isn’t just defensive anymore,” Lau said. “It is the growth asset class the market hasn’t recognised yet. The transformation is underway.”

The funding gap

If you’ve been stuck in traffic, worried about blackouts, or frustrated by slow internet, you’ve experienced the “infrastructure funding gap” first-hand.

Governments globally invest around US$1 trillion a year in infrastructure but Lau says, “we really need to increase that by six times.” The shortfall is creating an opening for private capital, and that’s where investors can benefit.

The investable universe spans electricity, gas, and water utilities, toll roads, airports, energy infrastructure and mobile towers.

“These are critical to the economy… if there’s any interruption, our lives are impacted immediately,” says Lau.

Mega-forces like energy transition, energy security, and digitisation underpin the sector’s resilience and are largely immune to short-term macro and geopolitical shocks.

While there are ASX examples such as Transurban (ASX: TCL), Auckland Airport (ASX: AIA) and APA Group (ASX: APA), Lau says the opportunity set here "is a very high quality universe, but it is very, very restricted and it's indeed a universe that has been shrinking.” 

Instead, Rescap looks at stocks globally for bigger opportunity sets; Australia and New Zealand combined make up less than 5% of its portfolio.

Back to core growth

In the U.S., electricity demand is inflecting upwards for the first time since the 1970s, with demand accelerating thanks to cloud computing, AI-driven data centres, and a new wave of manufacturing facilities.

AI data centres are the largest incremental demand driver, but the growth story extends to semiconductor fabs, battery plants, and EV manufacturing hubs.

For regulated monopoly utilities, this is a golden era. 

The sector is moving from low-growth “side businesses” back to core, regulated growth with some utilities now delivering high single-digit earnings growth.

2 stock picks

One of ResCap's highest-conviction holdings is NiSource (NYSE: NI), a Midwest U.S. utility that has quietly become “ground zero for AI.”

With the right climate, land, water access, and grid capacity, northern Indiana was chosen by Microsoft for a US$1 billion data centre, with Amazon and Google nearby.

“Not that long ago, NiSource was looking at flat electricity demand,” Lau said. “Now we’re looking at 70% demand growth through the 2030s.”

The company’s US$19 billion investment plan is fully pre-approved by regulators, trades on 20x PE with a 3% yield, and is cheaper than the S&P 500 despite its growth inflection.

In Europe, ResCap holds Eiffage (EPA: FGR), owner of strategic toll roads, airports, and a stake in the Eurotunnel.

The assets are outperforming GDP and benefit from post-COVID travel recovery and long-term transport modernisation plans. 

“These are irreparable monopoly assets,” Lau noted, and the stock trades at a discount to history despite the upside from EU infrastructure spending.

Valuations and private market arbitrage

Listed infrastructure has historically delivered returns comparable to unlisted, but with daily pricing transparency. The catch, however, is that listed assets often trade cheaper - sometimes significantly - than private market valuations.

This gap hasn’t gone unnoticed. “If a discount persists, private equity will take advantage of that arbitrage,” Parsons said, pointing to examples where private capital paid 20%+ premiums for partial asset stakes.

While private investors often cap deals at around US$6 billion, the sector’s scale means cherry-picking is inevitable. 

“There’s no reason why these assets need to be public…if they’re cheap, they’ll be taken private,” Parsons warned.

From defensive to growth

Over the past three years, the Resolution Capital Global Property Securities Fund (Managed Fund) has returned 11.09% p.a. (after fees), outperforming its benchmark by 3.32% p.a.

The portfolio is overweight U.S. utilities for their under-recognised growth potential and selectively overweight European infrastructure for valuation opportunities.

It is concentrated to 20–45 stocks, style-neutral, and multi-manager, allowing deep dives into each asset without key-person risk. Parsons explains:

“We look at all quality assets, we look for smart management teams, skin in the game, and sensible balance sheets. The best opportunities right now are being driven by common thematics — energy transition, energy security, and digitisation.”

Managed Fund

Resolution Capital Global Property Securities Fund (Managed Fund)

Global Property

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ETF

Resolution Capital Global Listed Infrastructure Fund - Active ETF (RIIF)

Alternative Assets

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