Sequoia Economic Infrastructure Income (SEQI)

Sequoia Economic Infrastructure Income (SEQI) offers yield high enough to rival most alternative assets or fixed income trusts from an ungeared portfolio of loans to borrowers in the infrastructure sector. The portfolio has a number of defensive properties, being highly diversified by sub-sector, borrower and asset, majority senior secured debt and managed with a conservative approach that has seen very low realised losses in the portfolio.

The infrastructure referred to includes new economy industries and themes like the physical support for artificial intelligence and new and greener energy supply like renewables and nuclear. With loans being made on a three to five-year basis, there is a constant flow of money back into the portfolio allowing the managers to be flexible with their positioning. Having been an early mover in the data centre space and generating attractive returns, they are currently finding lending standards on new loans slip due to the artificial intelligence boom, meaning this allocation has been falling. Instead, the team have been investing further down the chain in the power supply and networks connecting these to the grid, taking advantage of the same trends via loans with better rates and covenants.

SEQI’s Dividend yield of 8.8% reflects the impact of a Discount of 18%. This compares highly favourably to the company’s AIC Infrastructure and AIC Debt – Loans & Bonds peers. The dividend is fully cash covered, and the team report this cover should increase in the coming months as new loans start paying interest. The board has bought back substantial amounts of shares in recent years to tackle the discount, and states that managing the discount remains a priority.