Investment Trust Dividends
Mr. Market has given you the chance to lock in some high yields, 7% or above is worth researching. DYOR
SEQI
If the dividend is not cut, you should receive a gently increasing dividend over time.
SUPR
RECI
Warren Buffett Is Now Earning A Nearly 60% Yield On Coca-Cola – ‘When You Find A Truly Wonderful Business, Stick With It’
SEQI’s dividends are being held in a world of otherwise falling cash and bond yields.
Sequoia Economic Infrastructure Income (SEQI) generates a very high yield (8.2% at the time of writing) by lending money to infrastructure projects, from roads, railways and ports, through to data centres, renewable power generation and broadband networks. Its loans are heavily backed by real assets, with an average loan-to-value of 68%, and made to borrowers which typically receive steady and contractual cashflows, spread across a broad variety of sectors and geographies to provide diversification.
Over the last year the discount has steadily marched in, but remains in double digits at 10.1%. Despite cuts to base rates in the UK, US and EU over the past few years, SEQI has held its dividend target for 2027 where it has been since 2023. With the board committed to a significant buyback programme, and with the prospect for rates to fall further in this cycle, we think yield and the Discount are increasingly attractive.
In order to broaden the geographical diversification and take advantage of the growing opportunities in private debt in Asia-Pacific, the board is proposing to amend the investment policy to allow up to 30% to be invested in that region and 10% in other jurisdictions (including Canada and Latin America), so long as the country of origin is in the OECD or has an investment grade credit rating. There is no intention to alter the current defensive, cautious approach to lending, or make a dramatic near-term re-allocation to Asia, but the change should bring SEQI’s policy into line with the rapidly developing market for opportunities in developed jurisdictions such as Japan, Korea or Singapore (in addition to Australia and New Zealand, where SEQI has previously invested), in which major infrastructure private equity managers are making investments in sectors such as digitalisation and energy transition.
Analyst’s View
SEQI looks to us to have a clear path to a sustained discount narrowing. While there was some uncertainty around the path for interest rates when the Iran conflict broke out, it now seems like rate cutting cycles will be resumed. As yields on cash and government bonds come down, and with spreads in the corporate debt market looking narrow, we would expect SEQI’s yield to look ever more attractive to income-seeking investors.
While the term ‘private debt’ is being bandied about negatively in the press at the moment (especially regarding US credit funds’ exposure to sectors such as software), as we discuss below, we think SEQI is a very different proposition to the US funds that have run into trouble, and there is no more natural read-across than there would be in the equity space from, for example, a geared, small-cap tech fund to a large-cap defensive infrastructure fund. Since the GFC, private credit has become a diverse and well-established asset class, with SEQI’s planned expansion into Asia-Pacific markets highlighting its continued growth. Just because some private debt funds have run into trouble, doesn’t mean the space should be rejected, any more than poor returns in some equity funds mean equities should be rejected.
We think the diversification in the portfolio, along with the high backing by real assets and regular turnover of the investments (with a short average life of less than 3.5 years) all speak to the prudent, low volatility source of this very high yield. There is no free lunch in investing, and for SEQI stock-specific risk has to be borne in mind, as does the potential for single loans to run into trouble, but the track record of the management team is encouraging in handling these situations.
By Niloy Chakrabarti
Published 29 August 2024
Retirement planning involves a lot of variables and requires a steadfast commitment to creating a corpus that can cover life’s unforeseen events and sustain your pre-retirement lifestyle for decades into retirement. The motivation to diligently contribute towards retirement investments is directly linked to an individual’s savings capability, which has stunted in recent years due to record-high living and borrowing costs, muted wage growth, ill-informed investments in volatile markets, and easier-than-ever access to short-term credit. While accumulating generational wealth alone is arduous, holding onto your hard-earned money and protecting it from market risks, taxes, and inflation is a totally different ball game. Millionaire author and the host of Netflix‘s “How To Get Rich” shared his 7-step retirement playbook in a recent YouTube video to help you retire much richer than you imagined.
The best way to apply this rule is to determine your annual spending and divide it by 4% or 0.04 to find how much you need to save for retirement. Let’s consider the average annual US household expenses of nearly $73,000. Dividing that number by 4% tells us that a person would require an average of $1.82 million to retire comfortably. Sethi likes this rule because you can play around with the annual spending amount to design a realistic retirement plan. Although he admits there are a lot of caveats to calculating the retirement amount accurately, the 4% rule offers a good “back of the napkin number.”
Tax breaks on capital gains and contributions, a relatively early penalty-free withdrawal provision, free money from employer matching, and high annual contribution limits make 401(k)s one of the most sought-after retirement plans in the US. Sethi views 401(k)s as among the most powerful retirement tools because of the hands-free investing experience and 100% employer matching options, sometimes up to 6% of your annual pay. He explains that if you start contributing 5% of your salary, assuming it is $3,000 annually, to a 401(k) at the age of 25 while fully utilising 5% employer-matching options (another free $3,000 annually), you will have $1.684 million by the age 65 if annual returns average at 8%. Without employer-matching contributions of up to 5% of your annual pay, the savings drops by 50% to $842,343. Hence, a 5% company match can double returns. Sethi advises you to contribute to your 401(k) monthly with at least an amount that utilises the full employer match.
Sethi explains that any debt you carry with an interest rate higher than 7% directly competes with the money you invest for the future. He asks a simple question: Where do you think more money is going if you have $20,000 in credit card debt with a 26% APR and expect to earn between 7% and 8% from investments? Hence, he believes that paying off your debt is an investment in your future. High living costs due to rising interest rates to curb inflation have weighed heavily on US household budgets, pushing more people deeper into debt to sustain as delinquencies continue to grow. Easier access to credit via social media has also led many to rack up unnecessary debt. Sethi suggests that people in debt can save as much money as possible by first paying off the highest interest-rate loans.
According to Sethi, as you free up monthly cash flow by repaying your debt, reducing monthly costs, or downsizing, you can put that extra money into a Roth IRA, even if you have a 401(k). One reason is that your 401(k) set up through your employer offers pre-set funds, which can sometimes have a high expense ratio. A Roth IRA allows you to invest in individual stocks, target-date funds, and index funds, among other investment instruments. The point is that you can pick low-fee funds in a Roth IRA that align with your goals so that you don’t lose a big portion of your hard-earned money towards fees that grow with your portfolio size.
While a 401(k) will grow your pre-tax contributions and your retirement withdrawals are taxable, a Roth IRA grows your post-tax money completely tax-free, and qualified withdrawals are not subjected to taxes. Sethi explains that you pay taxes on smaller amounts of money now, which is more affordable than paying higher taxes on capital gains and bigger withdrawals in retirement. If you have done well in your career, Sethi assumes you’ll be in a higher tax bracket during retirement, meaning paying more taxes to the government. However, it is important to know your annual income must be under the Modified Adjusted Gross Income (MAGI) limit of $161,000 or $240,000 for those filing jointly in 2024 to be eligible for contributing up to $7,000 in a Roth IRA. Sethi recommends investing in target-date funds via Roth IRAs offered by leading providers like Vanguard or Fidelity that charge low fees. When you invest in target-date funds based on the year you want to retire, the instrument automatically diversifies your investments based on age. Over time, fund managers automatically adjust your portfolio asset allocation to be more conservative to mitigate market risks.
Sethi suggests putting effort into increasing your 401(k) investments to the 2024 contribution limit of $23,000 only if you have fully utilised employer-matching contributions in your 401(k) and maxed out your Roth IRA contributions. It would help if you maxed out your Roth IRA contributions first because you’d want to grow as much money as possible tax-free and without any tax liabilities on withdrawals. Once you have exhausted your Roth IRA limit, Sethi suggests putting the extra cash towards your 401(k). Since 401(k) contributions are tax-deductible, you can significantly reduce your annual taxable income and tax rate to free up more cash. However, you don’t need to report 401(k) contributions on your tax returns because your employer will have already lowered your taxable income on your behalf. If you can comfortably afford to max out your 401(k) contributions, Sethi suggests calculating the difference between the contribution limit and your actual contributions and breaking down the amount into monthly payments before setting up automatic monthly debits.
Sethi believes you can generate hundreds of thousands of dollars by opening and “supercharging” a health savings account (HSA). This account allows setting aside pre-tax money to pay for medical expenses, including deductibles, co-payments, and postpartum care, alongside traditional medical and dental spends. HSAs are often ignored because they are only available to people with high-deductible health plans (HDHP), which require you to pay a high minimum deductible of at least $1,600 before coverage kicks in. However, HDHPs often come with relatively lower premiums while the deductible varies every year. Sethi said that even people with access to HSAs need help understanding how to leverage the account to grow their money. AN HSA can become a powerful investment account because it lets you invest in stock and mutual funds. Furthermore, the triple tax benefits of contributing tax-free money, taking a tax deduction from annual income, and growing the money tax-free also offer a chance to create wealth faster with the power of compounding.
If you have maximised your 401(k) and IRA contributions, cleared high-interest debt, and optionally invested in a HSA account, Sethi says there’s one more thing you can do next. He suggests putting any money left in a non-retirement “taxable” investment account. The biggest advantage is that there’s no limit to how much money you can contribute to the account, and Sethi believes many wealthy people have the bulk of their savings in these accounts. Moreover, taxable investment accounts offer a wide range of investment options for portfolio diversification, and there are no restrictions or conditions on withdrawal, unlike 401(k) and IRAs.
I’ve used SUPR as the working example as it’s one of the safest dividends in the market but no dividend is entirely safe, unless you buy gilts or treasuries and hold to maturity. With the benefit of good ole hindsight, I bought too high but in 2022 high yields were as rare as hens teeth.
After several trades the position was exited, including earned dividends for a small profit of £292.00.
There were £2,861 of dividends in the above figure which have been re-invested back into the SNOWBALL to earn more dividends to buy more shares.
Compounded by the number of years before you start drawdown.
Latest position
There is a general misunderstanding of the term ‘To Top Slice’.
When you top slice the profit is the profit of all the shares in your share holding and you will note although the ‘profit’ taken was £225, great for a holding of one day, until the underlying shares are sold, the actual profit is £6.16.
There are two pots of money in your Snowball, capital where the last profit sits, although the market could take back the profit and some if a Black Swan sails by and earned dividends, which if re-invested elsewhere into you Snowball, SUPR can’t take back your income. Although the more you trade the more chance of buying a clunker.
The closed trades above 1k profit, which will should more than equal any future clunkers in the SNOWBALL.
A new position has been opened in SDIP.
SUPR xd next week for 1.545p = a yield of 7%.
If the SNOWBALL was near to drawdown, even if the price increases and the yield falls it would remain a core holding of the SNOWBALL.
The SNOWBALL is still accumulating, so if the price increases, SUPR would be sold and the cash re-invested in a higher yielder, although the yield you buy at is the yield you should receive for as long as you own the share, hopefully gently increasing.
The best outcome for the SNOWBALL, would be for the price to go sideways or even better fall and then some more shares could be added to the SNOWBALL at a yield higher than 7%.
Now if UK gilts yield 6% the risk reward would mean that holding SUPR at 7% was not worth the risk, although if UK Gilts yield 6%, SUPR’s price could fall and therefore be higher than 7%.
Largest closed clunker.
Story by Aditi Rane
Happy senior woman smiling at home© Getty
Millions of Brits rely on the State Pension to fund their retirement – but experts say one long-term investing strategy could potentially help retirees generate a second income stream worth as much as their annual pension payments.
The full new State Pension is currently worth £241.30 a week, equivalent to just under £12,550 a year. While the amount received depends on an individual’s National Insurance record, many savers are looking for ways to boost their retirement income beyond the state provision.
One approach gaining attention is building a portfolio of dividend-paying shares capable of generating annual income that matches the State Pension. If successful, this could effectively double a retiree’s yearly income.
Senior woman has financial problems. Counting money, monthly pension, don’t have enough money for paying bills.© Getty
The size of the portfolio required depends largely on the dividend yield achieved. Based on the current average FTSE 100 dividend yield of around 3.1%, an investor would need a portfolio worth approximately £405,000 to generate £12,550 a year in dividend income.
However, if a portfolio achieved a 5% yield, the amount required would fall to around £251,000.
While those figures may appear daunting, financial experts stress that retirement planning is typically a long-term process rather than an overnight achievement.
For example, someone investing £1,000 a month into a Stocks and Shares ISA and achieving average annual growth of 5% through compounded returns could potentially build a portfolio large enough to reach the target within around 15 years.
The timeline could be shortened further through a Self-Invested Personal Pension. Thanks to pension tax relief, a monthly contribution of £1,000 is automatically boosted to £1,250 for basic-rate taxpayers, allowing retirement savings to grow more quickly over time.
Experts note that choosing the right investment vehicle is an important first step. While SIPPs offer attractive tax advantages, they also come with restrictions on when money can be accesse
Stocks and Shares ISAs provide greater flexibility, although they do not offer the same upfront tax relief.
Whichever route investors choose, maintaining regular contributions is often seen as the key factor in building long-term wealth. Increasing monthly investments can accelerate progress towards retirement goals, while lower contributions may extend the timeframe required.
Building a diversified portfolio is also considered essential. Rather than relying on a handful of high-yield shares, investors are generally encouraged to spread their money across a range of companies and sectors to reduce risk and create a more sustainable income stream.
Financial analysts caution that dividend income is never guaranteed and investment values can rise and fall. Future returns may differ significantly from historical averages, meaning investors should carefully consider their own circumstances before making decisions.
Nevertheless, for those willing to invest consistently over many years, matching the value of the State Pension through dividend income remains an achievable target that could significantly enhance retirement finances
Trust Intelligence from Kepler Partners
Investor Edition
Discounts have come in for equity trusts, but alternatives are still in the doldrums – we see value in the sector.
Thomas McMahon
Updated 15 Jul 2026
This is not substantive investment research or a research recommendation, as it does not constitute substantive research or analysis. This material should be considered as general market commentary.
Perceptions take time to change: some of us still need to learn it hasn’t been called Czechoslovakia for 35 years. Similarly, in the investment trust sector, there is still a general perception that discounts are under pressure, but we are no longer sure this is really true – at least in the equity sectors. Equity investment trusts are back within their pre-2022 range on average, albeit at the wider end of it. And the average discount is moving much further back in and then out again on macro newsflow, as we’d expect. Meanwhile, there are a number of equity trusts trading on a premium and issuing new shares, across multiple sectors.
On the other hand, in the alternatives space the picture is different. We have seen some narrowing, with many trusts making big moves back into a narrower trading range, but in aggregate they are still some way short of their pre-2022 normality. The trend is clear though, with corporate activity of all sorts thinning the field and seeing assets come out of the sector, creating a more advantageous environment for the survivors. Here we look at those alternative trusts we think are most likely to see a sustained, significant discount narrowing back to pre-crisis levels.
As analysts, we spend a lot of time discussing NAV returns. It’s the best way to analyse the managers’ performance, and it should also be, subject to caveats, more predictable – at least, the factors that affect the NAV performance of different strategies should be more quantifiable and predictable. But share price returns are what you get, at the end of the day. Indeed, one of the main attractions of our sector is the ability to make exceptional returns by buying something that is out of favour and seeing the discount close when sentiment changes. The challenge is that seeing through poor sentiment, and investing in a contrarian manner, is extremely hard, and involves working against some deep and important human instincts to run with the herd.
Back in late 2023, discounts were exceptionally wide until there was some certainty that the interest rate hiking cycle had peaked. Morningstar’s index of all investment trusts saw an average discount of over 19% that October. This figure had fallen to 10.8% as of 07/07/2026, having hit single figures in a few days before the latest fighting in the Middle East. Excluding the alternative asset sectors, the picture wasn’t quite so bad three years ago, with the average discount peaking at 14%-15%, and these equity and bond trusts have now established a single figure average discount in 2026, which is at 8.6% at the time of writing but has been as narrow as 6.5% when the conflict has been calm.
Equity income strategies have seen a particularly strong recovery in demand, with the UK equity income and global equity income sectors currently both trading on a premium on average. The Asia Pacific equity income sector is meanwhile on a discount of just 1.1%. In the AIC North American sector, BlackRock American Income (BRAI) is seeking shareholder permissions to issue even more shares, the board believing the 15% it can issue not likely to be enough this year. BRAI has performed well, but also importantly, in our view, offers something very different: a heavily quant-based and systematic approach to stock selection which has worked well in US vehicles, along with a tilt to value which is quite rare after 10 to 15 years of value strategies departing and leaving the field to growth. It’s worth noting that at c. £166m in market cap it is “too small” in received wisdom, which perhaps should make boards take note that there is still plenty of demand for smaller trusts if they have the right strategy. It’s easy to see why there might be this recovery in demand for equity income. As rates have come down, equity income yields look more appealing, while the dividend growth they offer looks more attractive when bond yields are expected to fall. But we also think it’s the case that concerns about equity markets selling off have moderated, which makes the growth in equities more attractive.
In the growth equity sectors the picture is a bit more mixed, with strong divergence between winners and losers. Many of the ‘losers’ have been or are in the process of winding up or merging themselves away, and as the number of options in a sector falls, the remainder benefit from an improving technical picture. But good performance has also been rewarded, with top-performing trusts and those with a distinctive remit achieving very narrow discounts.
We have seen Scottish Mortgage (SMT) move from a 22% discount to a 7.7% discount over the past three years, and even trade on a premium for some time ahead of the SpaceX IPO. Given the huge size of this trust, at £18bn in total assets, and the huge number of shareholders, this is very meaningful for sector averages as well as investor sentiment. On the other hand, the much smaller Lindsell Train (LTI) has seen its discount move from low single figures to c. 20% over the same period: less significant for sector averages, but indicative that performance is being rewarded in some cases while other trusts are falling meaningfully out of favour. In the Europe sector, we have seen JPMorgan European Growth & Income (JEGI) and Fidelity European (FEV) enjoy meaningful discount narrowing, while the growthier strategies of Baillie Gifford European Growth (BGEU) and BlackRock Greater Europe (BRGE) have seen their discounts widen. In our view, discounts in the equity sectors can be considered back to ‘normal’: risk aversion and macro concerns are seeing them move in and out within single digits, while the success or failure of a strategy explains relative discounts. We would say, though, that the latter effect is still very pronounced compared to pre-2022, i.e. investors are currently very unforgiving about poor performance.
If we look at the alternative sectors, at the top level discounts don’t really seem to have moved much yet. The chart below shows the discounts of the renewable, infrastructure and private equity sectors over the past three years. Private equity looks stuck in its post-2023 range, as does renewable energy infrastructure. Only the infrastructure sector seems to be on an inward trend.
Prima facie, the changing rates outlook should have been positive for alternatives too. However, there are a number of factors that explain why discounts might have been slower to come in. One is simply the lead time between investment and maturity for income investors. If investors switched from alts to bonds over 2022 and 2023, they would have enjoyed yields peaking in October 2023, but then seen the opportunities get steadily less and less attractive – that index now yields 7%. On average, high yield bonds have a maturity of around three years, so anything invested at that point will have to be reinvested soon, if it hasn’t already been traded. It is true that sterling high yield is still trading closer to its peak back then, but this is a small market in international terms and dominated by some ‘interesting’ credits like Thames Water. For a diversified investor looking to reinvest, we think the yieldcos in the investment trust sector are only going to look more attractive in the coming months and years. The AIC Debt – Loans & Bonds sector moved decisively onto a premium in mid-2024, with around 8% seemingly being what investors are looking for in a high yield or otherwise riskier bond portfolio. We think as rate cuts make this harder for the conventional bond portfolios to generate, and as other risk factors recede, the high yields on offer in many of the alternatives will come down to this sort of number and lower, and bring in the discounts.
One trust we think looks ripe for a steadily narrowing discount as rates come down is Sequoia Economic Infrastructure Income (SEQI). SEQI makes loans backed by real assets, spread across numerous crucial infrastructure sectors. This yield is generated without the use of structural debt, and it has managed to maintain the same dividend yield since mid-2023, despite the rate cuts seen since then. We think that as yields on cash and government bonds come down, and with spreads in the corporate debt market looking narrow, SEQI’s yield will look ever more attractive to income-seeking investors, particularly considering the defensive characteristics to the infrastructure sector and well diversified portfolio.
Another factor which we think has weighed on SEQI’s discount in recent months is concern about what is happening in the US private debt market. The BDCs that have run into trouble over there could hardly be more different than SEQI. SEQI invests in loans backed by real assets in critical infrastructure sectors and does not gear them up. The US BDCs are typically highly leveraged and lending to asset-light software companies. Private debt is a fairly new concept in the mass market space, so it is natural that investors might be wary, but we think it is now a well-established asset class and it makes no more sense to reject it outright than it would be to eschew equities entirely after a given sector crashes. We think investors are starting to appreciate SEQI is not affected by this US story, and that explains why the discount has come back in after widening in April when the concerns were at their peak.
Source: Morningstar
As a broader point, we think investors have simply become wary of being involved in unlisted assets, and frightened that they are missing some vital information. There has been a lot of scepticism about the valuation and attraction of different unlisted asset classes, often with a specific flavour but, we think, always with an underlying scepticism in common. A few years ago we saw Hipgnosis Songs end its life amidst acrimony over valuations, and we think this created a cloud under which alts as a whole suffered. Some readers may remember that a valuation by Citrin Cooperman was at the heart of the controversy; in 2023 they valued the catalogue Hipgnosis owned at $2.6bn. Blackstone eventually bought the Hipgnosis catalogue for an implied $2.2bn valuation in 2024. Well, in May this year, Blackstone flipped the catalogue (plus some extras) to Sony for $4bn, giving them a handsome return and suggesting the original valuations weren’t too far off at all. 2023 and 2024 were the height of the uncertainty about unlisted assets. We think this sale is just one straw in the wind showing that panic and short-termism set in back then, and it’s now time to take a cooler look.
Another sign is the reopening of the IPO market, most notably with the massive success of SpaceX. SpaceX has been held by a number of investment trusts, from Scottish Mortgage (SMT) through to RIT Capital Partners (RCP), held through a period of ramp-up, massive investment and cash burn, and a lot of scepticism along the way. We can debate the valuation, but it is clearly a massive validation of the model of investing in companies which remain unlisted for much longer than before, and IPO once they are large and mature businesses. Uber is a great example of a company to follow this path much earlier. Before its IPO it was riddled with controversy, and was valued at $120bn at one stage, raising eyebrows. The IPO value ended up being a much lower $76bn, and the shares fell over 2021 and 2022, seeming to show that this model of staying private and unprofitable for longer was going to end up a disaster for early investors. However, Uber has since developed into a highly profitable business, and its market cap has reached $150bn, well ahead of the pre-IPO marks.
In Europe we are also seeing encouraging signs from the unlisted equity space. The IPO of Italy’s Bending Spoons on the Nasdaq was great news for its backers at Baillie Gifford, including BGEU and Schiehallion (MTN). Meanwhile, big fund raises in the space and defence sector have boosted the NAV of Molten Ventures (GROW), most notably the huge up-round for ICEYE, which manufactures and operates advanced satellites. The Molten team note that funding for the larger companies in the venture space has shown a good recovery from its 2022 and 2023 lows, and we are watching to see if this starts to cascade down into the earlier stage and smaller businesses. A bumper IPO of Revolut is still on the cards, which would benefit GROW. Revolut has reported excellent financials and was rewarded by a significant write-up last November. GROW has top-sliced this holding in the up-rounds, but retains a significant position. GROW’s near-60% discount has narrowed massively over the past year, delivering exceptional share price gains, but in our view at 20.5% it remains a significant discount opportunity.
The artificial intelligence trade has made fortunes for those who invested in Nvidia back in 2022, and the memory manufacturers last year, and has driven returns in a number of related sectors and industries. There is scope for Anthropic to IPO at a valuation of over $1.2trn, which would be great news for SMT and MTN shareholders, and the AI trade is far from over, but we think there is a growing concern to diversify portfolios.
One way of doing this is to look for assets and portfolios which are geared to the current growth trends but for some reason haven’t revalued. We think a good example is Cordiant Digital Infrastructure (CORD). Like GROW, it has significantly rerated, but remains at a c. 20% discount. CORD invests in the “plumbing of the internet”, meaning telecoms towers, fibre-optic networks and data centres. We think it might have been categorised as a yieldco by some investors, but from the start its model of “buy, build and grow” has aimed at a 9% total return, with a dividend providing around half of that. In fact, it has grown the NAV by 13.5% annualised since launch, on our calculations, so out-performed its target and delivered growth a SMID-cap equity trust would be proud of. A particularly exciting element in the portfolio is the Prague Gateway asset, which is a project to build a huge, 26MW data centre. Development is set to begin, and there is potential for this to add a meaningful amount to the NAV over the coming years.
There’s definitely a growing sense of unease in how top-heavy markets have become, and so investors are also likely to be looking for growth opportunities outside the AI trade too. Asian and emerging markets indices are now almost as dependent on the AI trend as US and developed world indices are. There is some respite in markets such as Latin America, where commodities continue to play a major role, but commodity markets are increasingly being driven by expectations on data centre and power grid build out, so even these markets are dependent on AI to some extent. In that light, we think the growth potential in infrastructure should only look more attractive.
Indeed, we think HICL Infrastructure’s (HICL) strategic shift announced at their recent capital markets day could be a catalyst for the market to look again at its proposition. HICL’s discount has narrowed meaningfully from last year’s c. 30%, but still looks attractively wide at 16%. With the portfolio having shifted from essentially a yieldco to a 50/50 split between yield and growth, the plan is now to allocate up to 20% to ‘enhancers’: investments with a higher, 12%+ p.a., expected return, with holding periods expected to be shorter and HICL investing to grow the asset before selling it on. The team see huge opportunity in the need for growth and development in infrastructure to hit social and governmental expectations.
We think yield, a reassessment of unlisted assets, and the need to diversify growth portfolios should all see discounts in the alternatives space trend in over the coming months and years. There has been a lot of consolidation across the sector, with boards merging or winding up their trusts, and this has created a good technical situation for the survivors: when appetite returns, there are fewer options to choose from. Interest rate cuts would be extremely helpful, but are not necessary to see meaningful narrowing in most of the cases discussed. That said, we have seen in the equity sectors that strategies that have performed poorly or failed to buy back shares have been punished hard, and we think it possible that those in the alternative sectors which can’t provide some evidence their NAVs are justified, i.e. through asset sales, could be losers. Equity trust discounts haven’t narrowed across the board, but the winners have outweighed the impact of the losers, and we expect to see a similar Darwinian environment in alternatives.
I’ve took a ‘profit’ of £225 by selling 257 shares in SUPR bought yesterday.
Mr. Market is always right but sometimes not that bright. I will keep the remaining shares for the dividends. Cash for re-investment £517.00, which with the dividends to be received this month will be re-invested.
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The S&P 500 Shiller CAPE ratio is on the verge of reaching its highest level in history.
By Adam Spatacco – Jul 17, 2026
The S&P 500 has long served as a barometer of investor sentiment. Among the tools used to assess the index’s valuation, the cyclically adjusted price-to-earnings (CAPE) ratio stands out for its ability to sift through short-term noise and reveal whether stocks are priced reasonably relative to their long-term earnings history. Understanding this metric helps explain both market extremes and the steps smart investors can take when prices climb sharply.
The CAPE ratio divides the current level of the S&P 500 by the average of inflation-adjusted earnings over the past 10 years. This approach removes the fluctuations that can distort ordinary price-to-earnings (P/E) ratios, which can appear artificially low during periods of abnormally high profits or artificially high after a single down year.
Image source: Getty Images.
A conventional P/E might appear “expensive” simply because earnings per share (EPS) have collapsed in a recession, even if stock prices have not fully adjusted. The CAPE ratio, by contrast, reflects a smoother picture of sustainable profitability across different economic cycles.
When the CAPE ratio begins to climb, it usually signals that stock prices are increasing at a faster rate relative to underlying earnings. While this can stem from investor optimism about future growth, it can also reflect mounting speculation or easy credit conditions. Over the long term, higher CAPE readings have been followed by more modest stock returns because frothy markets leave less room for further multiple expansion and more room for eventual compression when reality sets in.
Historical annual averages show that the CAPE ratio reached or surpassed a level of 40 for consecutive years only once: in 1999 and 2000, when it reached 42.1 and 41.7. These readings occurred during the peak of dot-com euphoria.
S&P 500 Shiller CAPE Ratio data by YCharts
At that time, investors were pouring capital into internet start-ups and established technology companies alike, hoping that the emerging digital economy would generate limitless growth. As a result, many companies commanded stretched valuations despite minimal revenue traction and nonexistent profits. The broader market’s valuation expanded dramatically as enthusiasm outpaced concrete fundamentals.
As the chart above illustrates, the subsequent unwinding after the dot-com bubble was painful. Beginning in 2000, the realization that many internet businesses lacked a viable path to sustained earnings triggered prolonged selling pressure. Naturally, technology stocks led the decline, with the Nasdaq falling more than 75% from its peak and the S&P 500 entering a bear market that lasted into 2002.
This episode demonstrates how quickly sentiment can reverse once valuation detaches from reality. While the market eventually recovered, the scars of the extremes witnessed during the dot-com era remain etched in investor memories even today.
As the chart above shows, the current CAPE ratio is inching closer to its dot-com-era highs. This elevated level invites caution even if it has not yet matched the extremes seen more than two decades ago. A continued rise in the CAPE ratio could foreshadow a period of weaker total returns or a meaningful drawdown — though such outcomes are never certain.
Rather than attempting to time the market, smart investors can benefit from maintaining broad diversification across sectors and asset classes. Within stocks, keeping an emphasis on blue chip companies with diversified business models, strong balance sheets, and a proven ability to navigate economic cycles provides greater resilience than a concentrated bet on any single theme or growth narrative. Established businesses tend to generate more predictable cash flows and often return capital to shareholders through dividends, offering a degree of downside protection during volatility.
In addition, holding a meaningful cash allocation alongside stocks will further strengthen your portfolio. Cash serves as both a defensive buffer during volatility and as dry powder for purchasing quality businesses at more attractive prices should the opportunity arise.
Above all else, history shows that the S&P 500 has always absorbed economic shocks, corrected its excesses, and resumed an upward trajectory as the economy grows and companies innovate. Through diversification, a focus on durable business models, and prudent cash reserves, investors can participate in that resilience while reducing the impacts of valuation-driven turbulence.
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