Sequoia Economic Infrastructure Income (SEQI)18 December 2025

Disclaimer

Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by Sequoia Economic Infrastructure Income (SEQI). The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.

SEQI generates an exceptional yield by lending against critical modern infrastructure.

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.

Analyst’s View

We think SEQI is an attractive income product in the current economic environment. The portfolio is invested in defensive, non-cyclical sectors and in crucial infrastructure with strong economic and policy support behind it. The lack of fund-level gearing is notable, as it means that the NAV should be more stable than many other high-yielding options, and that financing costs don’t affect profitability. With the strong focus on new economy infrastructure like data centres, broadband and power networks we think the trust offers a way for income investors to generate a high return from these secular growth themes without taking equity risk.

We think the discount largely reflects the higher interest rate environment since 2022 which has seen capital go into cash and government bonds, and so as rates continue to come down demand for SEQI’s shares should rise. In that light, buying a portfolio of ungeared loans on an 18% discount looks attractive, particularly when considering the board’s commitment to buybacks and the fact the NAV includes a pull-to-par gain of c. 2.8p, or 3%, on loans trading below 100. While falling interest rates should see yields available fall across fixed income sectors, it is notable that SEQI has maintained its portfolio yield and dividend target while rates have fallen between 125bps and 235bps in the major jurisdictions. We think this speaks to the diversity of the opportunity set, which continues to benefit from strong technicals, and the conservative approach of the management team, who have plenty of levers to pull to maintain the yield without massively tramping up risk.

Bull

  • High dividend yield from ungeared portfolio with relatively low credit risk
  • Strong technical picture with withdrawal of banks from the sector and few competing funds
  • Specialist team with many years of experience in this space pre-SEQI launch

Bear

  • Falling interest rates will create a challenge to maintain the yield
  • Buybacks have used large amounts of cash which, if continued, would reduce funds available for investment and maintaining yield
  • Unfamiliar asset class which is less transparent to the average investor