Sequoia Economic Infrastructure (LON:SEQI) reported what management described as a resilient fiscal 2026 performance, with the listed infrastructure debt fund maintaining its dividend and increasing its net asset value per share during a volatile year.
Randall Sandstrom, CEO and CIO of SEQI, said the results covered the period from April 1, 2025, through March 31, 2026. He described SEQI as “a platform with scale” and said the fund has an 11-plus-year record of meeting dividend targets in volatile market conditions. SEQI had net assets of about GBP 1.4 billion at year-end and a portfolio of 50 positions.
- Net asset value per share increased to GBP 93.17 from GBP 92.55.
- Total return on NAV was 8.4%, while total return on a share price basis was 6.6%.
- Earnings per share rose to GBP 0.0683 from GBP 0.0504.
- Dividend cash cover increased to 1.06 times from 1.0 times.
- The share price ended the fiscal year at GBP 76.6 and later traded at GBP 81.3, according to management.
Portfolio income drove annual performance
Steve Cook, Head of Portfolio Management at SEQI, said the company’s annual performance was driven primarily by interest income of GBP 0.0827 per share and stable loan valuations. The main downward movement was the dividend paid during the year.
Cook said SEQI’s cumulative total return over the longer term was 92%, compared with 46% for high-yield bonds. He said the fund achieved that with about half the volatility of broader credit markets over the past 11 years, which he attributed to the “intrinsic merits of infrastructure” as a stable asset class.
Management emphasized the fund’s relatively short average loan life of 3.4 years, which Cook said gives SEQI flexibility to generate cash, buy back shares and redeploy capital into new lending opportunities. He also said the average equity cushion in borrower capital structures was 38%, equivalent to a loan-to-value ratio of about 62%.
At year-end, about 63% of the portfolio was senior secured debt. Cook said the fund had moved to a roughly 60/40 split between fixed-rate and floating-rate debt to position the portfolio for a potential decline in interest rates over time. Construction exposure was 12.8%, with the remainder in operational projects.
Credit performance improves as non-performing loans decline
Matt Dimond said SEQI’s non-performing loans improved during the financial year, falling to 0.3% of NAV from 1.0% a year earlier. He said one difficult loan, a Washington, D.C., property-backed loan leased to a school, had been fully sold and represented less than 0.1% of NAV. The remaining non-performing balance was a municipal infrastructure loan in Germany, representing 0.3% of NAV.
Dimond also cited Moody’s data showing average default rates for Ba or BB equivalent infrastructure debt at 0.9% over a 40-year history, compared with about 1.6% for general corporate lending. He said infrastructure also tends to have stronger recovery rates than corporate credit.
Buybacks remain part of discount-control strategy
SEQI continued its share repurchase program, which management said began in July 2022. During the fiscal year, the fund repurchased 75.3 million ordinary shares. Since the start of the program, it has repurchased 288.5 million shares at an aggregate cost of GBP 232.3 million.
Dimond said the buyback was accretive for shareholders and added GBP 0.0074 to NAV per share during the financial year. Sandstrom said the company does not discuss specific price or volume targets for buybacks, but noted the chair’s statement referenced an “active and ongoing” program.
Management also addressed the fund’s discount to NAV. Sandstrom said the discount finished the fiscal year at 17.8% and had narrowed to 12.2% at the time of the presentation.
Active Care Group remains a larger position
During the Q&A session, Cook addressed investor questions about Active Care Group, which he said represented a position larger than the fund’s ideal size. He said most of SEQI’s debt exposure to Active Care Group is senior secured, making up 4.6% of the portfolio, with a smaller junior position representing 2.6% of NAV. The fund also has equity upside that management is currently valuing at zero.
Cook said SEQI had invested nearly GBP 40 million in the business, including just under GBP 31 million in the estate, as well as spending on digital infrastructure, management reporting and clinical systems. He said quality care ratings improved from 72% rated good two years ago to about 96% today.
Cook said the strategy includes repositioning the business toward private-pay neurorehabilitation and making targeted disposals. He said the position remains a turnaround situation with an elevated risk profile, but management is “very confident” in the management team and the strategy.
Dividend and investment policy under review
Management said the board believes the current dividend can and will be maintained. Cook said the fund has strong visibility over interest income, with about 60% of the portfolio fixed rate, and said fee income from new loans also supports returns.
Sandstrom said the dividend remains under constant review, but did not indicate a timetable for an increase. He said the current yield of about 8.4% was nearly four percentage points above five-year gilt yields at the time of the presentation.
Cook also said SEQI is considering a change to its investment policy to reflect the growth of private credit markets outside the U.K., Western Europe and the U.S. The proposed change would not make the fund an emerging markets vehicle, he said, adding that eligible countries would need to be investment-grade rated or members of the OECD. The change would be subject to shareholder consultation, an AGM vote and FCA approval.
Sandstrom closed the presentation by saying SEQI’s infrastructure focus, credit structure, income orientation and diversification help differentiate it from other listed funds and broader private credit strategies.
About Sequoia Economic Infrastructure (LON:SEQI)
Sequoia Economic Infrastructure Income Fund Limited invests in a diversified portfolio of senior and subordinated economic infrastructure debt investments through its subsidiary Sequoia IDF Asset Holdings SA The Company operates through investment in senior and subordinated infrastructure debt instruments and related and/or similar assets segment. Its investment objective is to provide investors with regular, sustained, long-term distributions and capital appreciation from a diversified portfolio of senior and subordinated economic infrastructure debt investments.
