"A trifecta of resiliency, income and growth" and the market is sleeping on it

Please note this interview was filmed on 30 October 2026. 

"The market's not appreciating how much and how long this is really going to last for."

Sarah Lau, portfolio manager of the Resolution Capital Global Listed Infrastructure Fund (available as an ASX-listed Active ETF under the ticker ASX: RIIF), is talking about the investment needed in electricity networks over the coming decades which she argues is just the start of a generational cycle for the sector.

Lau gives two trends converging and reshaping infrastructure all at once - power demand and energy security. The spending required is so large that construction bottlenecks, planning and permitting will spread it over many years. And she believes demand is running ahead of what the market expects.

“We just really think that all this demand is still underappreciated.”

Her central point is that this growth sits on top of business models that haven’t changed, with inflation-linked cash flows and earnings that hold up through the economic cycle. Investors are being offered something rare - defence and growth at the same time.

In this interview, we explore where the demand is coming from, how it turns into returns, the risks to watch, and where listed infrastructure fits in a portfolio.

Demand - more than data centres

Data centres get the attention, but Lau says demand from AI is a lot broader than that. 

Across the US Southeast, manufacturing is coming onshore as supply chains move away from globalisation. At the heart of this is technological change. Battery plants, electric vehicle factories, chip fabrication plants and electrolysers are being permitted and built, and each one draws large amounts of electricity. "These things didn't used to exist if I look back 20 years ago," says Lau. 

Europe and the UK have a different reason to build. For decades they ran on cheap imported gas and oil, until the war in Ukraine and conflict in the Middle East exposed how vulnerable that left them.

“What they’ve done is really double down on electrification and energy transition so that they can produce their own electricity and power, whether it’s transportation or heating and cooling within their own shores.” Lau points out that even in Australia, high petrol prices are pushing more drivers toward electric vehicles.

The limit to meeting all this demand is physical. "There's only so much poles and wires that you can develop in any given year or even batteries and solar panels," she says.

How the spending reaches shareholders

For shareholders, the appeal lies in how regulated utilities turn that demand into earnings. As a monopoly supplier, a utility connects new customers to its existing network. Regulators approve the investment needed, and the utility is then permitted to earn a reasonable return on it, translating capital spending into earnings growth.

It’s a well-tested model, according to Lau. “It ensures that there is fairness across multiple stakeholders, the people who use these assets, the existing and the new ones, and shareholders as well. And when regulators look at setting these returns for shareholders, they understand that investors have a lot of choices globally.”

Lau notes how US states are also competing for investment. A state keen to attract a factory may encourage its utility to invest more than its neighbours, because the jobs and growth that follow benefit the state, too.

Affordability is the risk to watch

Lau said that for monopoly assets, maintaining a social licence to operate is as critical as a sound balance sheet. She pointed to the NSW Government's review of Transurban Group's (ASX: TCL) tolling amid cost-of-living pressures as a case in point.

"You can't stop paying your utility bills. You can't have your electricity cut off to your house," she said.

With cost-of-living concerns running high in a US midterm election year, Resolution Capital has steered clear of utilities whose bills it considers unaffordable. It has instead taken a position in Entergy (NYSE: ETR), which operates across Louisiana, Mississippi and Arkansas. Lau said the region's reliance on heavy industry means stakeholders view the utility's growth as supporting local jobs rather than burdening households.

Who carries the AI risk?

Utilities make up about 40% of fund, so Lau is often asked the obvious question - what happens if the AI boom falls short? Her answer is that utilities have most of the upside and much less of the risk.

Part of the protection comes from regulation, but the bigger protection comes from contracts. Because "grid capacity is a scarcity", hyperscalers such as Microsoft and Google now have to sign minimum take-or-pay contracts of 15 years or more to get connected.

Under these contracts the customer pays for a set amount of power regardless of how much it uses. She said the terms are lengthening as grid capacity tightens.

Entergy, Lau says, "have a deal with Meta at a data centre that if fully built will be the size of Manhattan."

"Ultimately it means that you get the upside from AI and data centre and large load users, but with a lot less risk than what many people are assuming."

Reliability strengthens the case for spending. Lau points to a blackout across Spain and Portugal, when the whole peninsula lost power and brought the region to a standstill.

"People were stuck on trains, fridges stopped working and food started going off," she said.

North America's last major outage, in 2003, affected about 50 million people. It prompted regulators to require bigger safety buffers above peak demand, and building those buffers took years of investment.

Where it fits in a portfolio

Listed infrastructure has historically returned about inflation plus 5%, with growth driving the extra 5%. Lau believes that growth is now picking up, while the defensive qualities are unchanged.

"Global listed infrastructure at this point in time is really a trifecta of resiliency, income and growth."

The inflation protection works differently across assets. Toll roads reset their prices every quarter or year, while North American railroads pass on rising costs each time a customer contract is renewed, relying on their monopoly positions.

That protection has been useful this year, when bonds and equities have not offset each other as reliably as investors are used to.

The private market points the same way. Private buyers have been paying well above listed prices for utilities, because there are only so many power and water networks to buy. 

Regulators also prefer listed owners whose balance sheets are easier to scrutinise, so many of these assets remain open to listed investors.

Lau said the evidence from the current US reporting season supports her thesis, with Entergy and Xcel Energy (NASDAQ: XEL) both increasing and extending their investment programs, and utilities continuing to sign take-or-pay agreements with large customers. 

"From the evidence that we're seeing today, it really seems like that we're conservative in our base case assumptions, which means it's an incredibly exciting time to be an infrastructure investor," Lau concludes.

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

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