“More manufacturing in the Americas is going to create more opportunity for rail. It just will,” said Ryan Lapointe, Managing Director, Clark & Lunn Infrastructure. “Anybody who’s manufacturing product in significant volume is going to need access to rail,” he continued, highlighting the role of rail in “resilient” supply chains.

The full article by Matt O’Brien, Journalist, Green Street is below.

Freight rail in vogue as US retools industrial supply chains

Originally published on March 26, 2026

Freight rail, particularly short-haul rail, is seen as a key part of fortifying the US’s ongoing reindustrialization.

Last year, US manufacturing construction spending hit historically high levels of roughly $223 billion, more than double what 2021 registered, according to Brightsmith, an executive search firm in the clean energy manufacturing industry.

New factories for computer chips, batteries, EVs, pharmaceuticals, and data centers are largely driving, arguably, the reshoring and, certainly, the rebuilding of industry, with investors and policymakers hoping such efforts eventually bring back an era reminiscent of mid-20th-century American manufacturing might.

“From our standpoint, we’ve seen some successful movement on reshoring, and see the need for a more resilient global supply chain framework for reliably moving goods,” said Matthew Brand, COO and head of capital markets at ITE Management, an alternative asset manager focused on critical transportation equipment. “Depending on the businesses that get reshored, we may see more intermediate and final assembly than full scale manufacturing.”

For infrastructure investors, the shift to reshoring and recalibrating supply chains – accelerated by post-COVID vulnerabilities and reinforced by the Trump administration’s tariffs – means favoring assets with contracted, diversified cash flows that sit at the new nodes of a more “atomized” North American network, industry participants said in interviews.

Brand identified rails, containers, chassis and trailers – though executives said rail could stand to benefit the most.

“More manufacturing in the Americas is going to create more opportunity for rail. It just will,” said Ryan Lapointe, managing director at Connor, Clark & Lunn Infrastructure, which owns the Alpenglow Rail platform of six rail terminals in key industrial markets. “Anybody who’s manufacturing product in significant volume is going to need access to rail.”

Connor, Clark & Lunn closed a private-placement debt deal for Alpenglow late last year at attractive spreads, citing the platform’s blue-chip customer base, full-suite transloading services and role in “resilient” supply chains. The use of proceeds included capacity for organic growth and M&A, both of which remain active pipelines.

The US Surface Transportation Board’s push to streamline regulation, with faster environmental reviews and potential categorical exclusions that could reduce project costs and timelines, comes at an ideal time and could foster marginal activity that otherwise may not materialize.

Loosening regulation and changing economic patterns mean short-haul railroads and intermodal terminals stand to gain disproportionately as components and sub-assemblies move multiple times between suppliers in a reshored or nearshored environment, rather than arriving in bulk at a handful of gateway ports.

John Porcari, managing director at lnvestcorp Corsair Infrastructure Partners, pointed to that pattern exactly.

“I know there’s a lot of attention on the class one railroads and there should be, but I’d also look at the short haul railroads where they may be a more important part of the supply chain with components and subcomponents than they were in the past. … the same applies to trucking as well,” he said.

Sophisticated original equipment manufacturers, including those in automotive and aerospace, are still mapping their tertiary suppliers and realizing that onshoring assembly does not mean onshoring the components, executives said. The result: more east-west, north-south and even intra-regional movements that favor flexible, rail-linked distribution.

Re/on/near shoring

Those interviewed attested that the reshoring of industry back to the US has been a mixed picture. But for certain businesses that have come back to North America, some assets are seen as central to those changes.

Ports themselves are not being left behind, but the focus is shifting. Cesar Valero Mendoza, partner at ALG, a transportation-infrastructure consultancy, said interest remains high for new or expanded container terminals on the Gulf of Mexico aimed squarely at nearshoring volumes – smaller than traditional international gateways but aligned with rising Mexican manufacturing.

Mexico’s established Tier 1-2-3 supplier base and productivity edge versus Asia, even under higher tariffs, continue to support the case, Valero added.

“Mexico turns out to be more competitive or gains some competitiveness versus Asia,” he said.

Cold storage at inland intermodal nodes, expanded short-haul rail spurs and leasing platforms that can scale with OEM assembly growth are among the more immediately investible pockets, executives said.

Technological tailwinds are also emerging. Mendoza flagged autonomous-truck corridors and dedicated logistics zones as likely developments within five years, driven by persistent driver shortages.

Meanwhile, the Al data center boom is amplifying these logistics tailwinds. Massive power demand growth – the first sustained increase in 25 years after decades of flat load – and the need for construction materials and equipment are boosting rail and intermodal volumes, particularly in the Southeast and Gulf Coast, where reshoring manufacturing and digital infrastructure are converging.

Morgan Stanley Infrastructure Partners sees “bullish pulls” in the Gulf and Southeast from power demand driven by both data centers and reshoring activity, said managing director and head of Americas Chris Ortega.

“So I think reshoring, as opposed to nearshoring, in areas that have overall robust growth for a variety of factors, including reshoring, are the places where we’re going to leg in and express that point of view,” he said. “The ability to diligence the duration or the specific impacted trade routes for international trade volumes due to tariffs and geopolitical events is challenging – and I’m not sure how one does that with conviction over a five-plus-year perspective.”

Tom Murray, managing partner at Power Sustainable Infrastructure Credit, agreed.

He sees reshoring creating broad incremental infrastructure demand.

“If you’re going to reshore things … there’s going to be an incremental need for more infrastructure to support that,” Murray said, explicitly including transport and logistics.

With governments facing deficits and competing priorities such as military spending, private capital – including direct lending – is expected to fill more of the gap.

“Private capital is out there looking to put money to work in reasonable risk-return opportunities,” Lapointe said. “Where things are going to struggle to get built is where there is no reasonable risk-return opportunity.”

In a world where geopolitics and trade are becoming fractured and more uncertain, investors may find stability for projects supporting reindustrialization by harnessing long-term public-private partnership financing arrangements, Porcari said.

“Certainly, uncertainty can be priced into the financing and contracts,” he said. “In fact, we are beginning to see tariff clauses written into P3 contracts.”

Congress will adjudicate on STB’s authorization renewal at the end of this year, presenting policymakers an opportunity to tweak legislation for federal loan programs, like the Transportation Infrastructure Finance and Innovation Act and Railroad Rehabilitation and Improvement Financing Program, so that more assets are eligible for such funding, added Porcari, who was port envoy for the Biden-Harris Administration’s Supply Chain Disruptions Task Force and deputy secretary and COO of the US Department of Transportation under President Obama.

Last week, the federal government and its private-sector partners announced huge P3 deals in the power sector – a 10GW gas-fired power generation project with NextEra Energy and a $4.2 billion high-voltage electric transmission initiative with AEP Ohio.

Meanwhile, those who cannot build are buying.

M&A pipelines in rail terminals and related logistics assets remain active, with disciplined buyers waiting for the right fit with existing customer footprints. About eight deals have been announced over the past 15 months, according to various trade news publications covering the sector.

Major Class I railroad mergers are rare due to strict STB oversight, while short-hauls occur only slightly more frequently. Between 2021-2025, each year averaged roughly one to three deals annually, except for 2025, when around six were closed, according to the same sources.

Some of the more notable deals from the last 12 months have been FTAI Infrastructure’s acquisition of Class II Wheeling & Lake Erie Railway in August 2025; Canadian National clinching its deal for Iowa Northern Railway in January 2025; Union Pacific Corporation’s mammoth $85 billion deal for Norfolk Southern Corporation, creating America’s first transcontinental railroad; among others.

A couple of weeks ago, Ridgewood Infrastructure acquired a controlling interest in Sierra Railroad Company, a California-based shortline rail platform – a move that was seen as expanding the platform’s strategic access to key dairy, agricultural, and industrial corridors, as well as interchanges with Union Pacific and BNSF Railway.

Shrugging off SCOTUS tariff ruling

And while the STB is pursuing a more growth-oriented regulatory environment, government also clouded the reshoring narrative when the US Supreme Court struck down the president’s legal justification for his tariff policy.

Yet, private sector executives doubt that move will kibosh reshoring.

Murray said the Supreme Court decision is unlikely to derail the reshoring trend, as national security and supply-chain resilience remain the primary drivers.

“Even with the recent SCOTUS tariffs decision removing or reducing some of the barriers to importing products, the incentives to encourage reshoring, such as federal loan and grant programs, as well as local and state economic incentives, remain,” Porcari said. “The Supreme Court has taken away a primary stick to encourage reshoring, but the carrots remain.”

Reprinted with permission from the author.

The post Green Street interviews CC&L Infrastructure: Why freight rail matters for resilient supply chains appeared first on Groupe financier Connor, Clark & Lunn ltée.

A previous post suggested that the Gulf War III shock would interact with concerns about private credit exposure to cause banks to tighten lending standards. April Fed and ECB lending surveys were flagged as important markers.

The ECB survey confirms the thesis, showing significant rises in reported and expected credit tightening balances across loan categories – see chart 1. (The Fed survey is expected next week.)

Chart 1

The shock, however, appears to have had an even greater negative impact on the risk appetite of borrowers. An average of expected demand balances fell to a level historically consistent with GDP contraction – chart 2.

Chart 2

With both supply and demand weakening, loan growth may slow sharply, in turn threatening a fall in meagre broad money expansion. Non-financial M3 rose by only 3.3% in the year to March.

Prospective monetary weakness argues for pre-emptive policy loosening but the ECB, following new Keynesian convention, is focused on upside risk to inflation expectations. Expectations measures, unlike money trends, failed to give timely warning of the 2021-22 inflation surge, contributing to policies remaining excessively loose. An opposite mistake may be brewing.

The post Rising Eurozone recession risk appeared first on Groupe financier Connor, Clark & Lunn ltée.

A previous post suggested that the Gulf War III shock would interact with concerns about private credit exposure to cause banks to tighten lending standards. April Fed and ECB lending surveys were flagged as important markers.

The ECB survey confirms the thesis, showing significant rises in reported and expected credit tightening balances across loan categories – see chart 1. (The Fed survey is expected next week.)

Chart 1

The shock, however, appears to have had an even greater negative impact on the risk appetite of borrowers. An average of expected demand balances fell to a level historically consistent with GDP contraction – chart 2.

Chart 2

With both supply and demand weakening, loan growth may slow sharply, in turn threatening a fall in meagre broad money expansion. Non-financial M3 rose by only 3.3% in the year to March.

Prospective monetary weakness argues for pre-emptive policy loosening but the ECB, following new Keynesian convention, is focused on upside risk to inflation expectations. Expectations measures, unlike money trends, failed to give timely warning of the 2021-22 inflation surge, contributing to policies remaining excessively loose. An opposite mistake may be brewing.

The post Rising Eurozone recession risk appeared first on Groupe financier Connor, Clark & Lunn ltée.

Driven by years of underinvestment, rapid urbanization and the need to adapt to a power-driven, technology-led world, infrastructure spending is a key tool governments use to stimulate economic growth. Regardless of what drives the allocation, civil infrastructure – the systems that underpin essential societal functions – remains a foundational focus of government spending.

The US government’s current focus on infrastructure

The 2021 Infrastructure Investment and Jobs Act (IIJA) is in full swing and will last until 2030 and beyond. The approximately USD1.2 trillion US expenditure bill is allocated to roads, bridges, transport safety, transit, freight, chargers, power and broadband.

Spending on US highways and streets is currently at historic highs, reaching a seasonally adjusted annual rate of approximately $149.5 billion in January 2026. This sector remains a primary driver of public infrastructure growth, bolstered by long-term federal funding. But despite high spending, the American Society of Civil Engineers (ASCE) estimates a $684 billion funding gap for roads over the next decade (2025–2035).

The business cycle is such that architecture and engineering firms gain from the bulk of the work at the onset, executing on planning and design. Then come the bids and proposals on work and equipment, which ultimately fill the backlogs of suppliers and contractors.

The right tools for the job

Based in Downers Grove, Illinois, Federal Signal Corporation (FSS US) manufactures specialized equipment for infrastructure maintenance, public safety and environmental cleaning. The company operates between 24 to 27 principal manufacturing facilities worldwide and directly manages over 40 service centres. Already within our portfolio, the company is one that may be positioned to benefit from infrastructure spending by providing the necessary equipment and technology to support civil infrastructure projects.

Federal Signal’s diversified business groups offer products that serve multiple infrastructure subsectors. The Environmental Solutions Group is the largest manufacturer of dump trucks in the United States. They also manufacture street sweepers, sewer cleaners and industrial vacuum loaders, safe-digging and road-marking equipment. The Safety and Security Systems Group provides technology and systems used by first responders and industrial facilities to protect lives and property.

Federal Signal delivers a comprehensive suite of equipment designed to support a wide range of IIJA-funded project areas, as highlighted in the table below.

Cementing a provider of construction materials

Large scale infrastructure projects such as bridges and transit require longer planning and often are fully realized toward the tail end of the spending period. Global Alpha is positioned through Eagle Materials Inc. (EXP US), an important producer of cement, to strategically capture the roughly USD550 billion allocated for new construction materials.

Eagle Materials possesses regional market dominance: The company’s 70+ facilities are concentrated in the US Heartland, Sun Belt and Mountain West. These inland markets are protected by high transportation costs, which limit competition from cheaper foreign imports.

Between 2024–2025, Eagle invested heavily in modernizing plants like the Laramie, Wyoming facility, increasing cement output by 50% specifically to meet the rise in IIJA-funded municipal projects. Within the same time frame, Eagle converted nearly 100% of its cement capacity to Portland Limestone Cement (or PLC). This low-carbon product is increasingly required for government-funded projects that prioritize environmental sustainability.

Strategically, the company shifted its sales mix toward non-residential and public infrastructure, sectors projected to grow by roughly 5% in 2026, to offset recent softening in the residential housing market.

Global phenomena

Civil infrastructure is being accelerated on a global basis; China spent USD550 billion on transport infrastructure in 2025 alone. Japan just began a USD140 billion mid-term plan for the implementation of national resilience. Global Alpha is exposed to global civil infrastructure buildout through Sany Heavy Equipment International Holdings Co. Ltd. (631 HK).

Hong Kong-listed Sany is the world’s third-largest heavy equipment manufacturer. Their equipment is designed with a focus on being “easy to own, easy to operate and easy to service,” prioritizing essential functionality over excessive technical complexity. The company is also a global leader in concrete machinery, especially after acquiring the legendary German brand Putzmeister. Products include truck-mounted pumps, stationary pumps and concrete mixers. Large-scale engineering contractors account for approximately 45% of Sany’s revenue.

That demand is increasingly coming from outside China: overseas markets now contribute 64% of revenue, led by Africa, where sales surged 55% on the back of infrastructure buildouts. To capitalize on this momentum, Sany has shifted its mix toward infrastructure-heavy “civil works” applications, helping drive a 41% increase in net profit in 2025.

Keeping assets clean, clear and operational

Global Alpha also holds Bucher Industries AG (BUCN SW), a Swiss industrial group that provides specialized machinery and components for essential infrastructure, specifically through its Bucher Municipal and Bucher Hydraulics divisions. Unlike heavy civil construction firms, Bucher focuses on the maintenance, cleaning and operational safety of existing civil assets.

Bucher’s connection to civil infrastructure is primarily functional, ensuring that public and commercial traffic areas remain operational and safe. For sewer and drainage infrastructure, Bucher produces specialized sewer cleaning and water recycling units essential for managing urban water networks and preventing flash flooding on major roadways. Bucher also provides construction site support through its heavy-duty sweepers, specifically engineered to handle the abrasive materials (e.g., aggregate, spoil) found on large-scale infrastructure construction sites.

Civil infrastructure is more than a standalone spending category – it is the operating backbone that enables other critical buildouts, from power and water management to digital connectivity. For Global Alpha, this creates diversified, real-economy exposure to long-duration public investment, spanning both new construction and the ongoing maintenance that keeps cities functioning.

The post Infrastructure investment: The tools, materials and makers powering civil works appeared first on Groupe financier Connor, Clark & Lunn ltée.

Driven by years of underinvestment, rapid urbanization and the need to adapt to a power-driven, technology-led world, infrastructure spending is a key tool governments use to stimulate economic growth. Regardless of what drives the allocation, civil infrastructure – the systems that underpin essential societal functions – remains a foundational focus of government spending.

The US government’s current focus on infrastructure

The 2021 Infrastructure Investment and Jobs Act (IIJA) is in full swing and will last until 2030 and beyond. The approximately USD1.2 trillion US expenditure bill is allocated to roads, bridges, transport safety, transit, freight, chargers, power and broadband.

Spending on US highways and streets is currently at historic highs, reaching a seasonally adjusted annual rate of approximately $149.5 billion in January 2026. This sector remains a primary driver of public infrastructure growth, bolstered by long-term federal funding. But despite high spending, the American Society of Civil Engineers (ASCE) estimates a $684 billion funding gap for roads over the next decade (2025–2035).

The business cycle is such that architecture and engineering firms gain from the bulk of the work at the onset, executing on planning and design. Then come the bids and proposals on work and equipment, which ultimately fill the backlogs of suppliers and contractors.

The right tools for the job

Based in Downers Grove, Illinois, Federal Signal Corporation (FSS US) manufactures specialized equipment for infrastructure maintenance, public safety and environmental cleaning. The company operates between 24 to 27 principal manufacturing facilities worldwide and directly manages over 40 service centres. Already within our portfolio, the company is one that may be positioned to benefit from infrastructure spending by providing the necessary equipment and technology to support civil infrastructure projects.

Federal Signal’s diversified business groups offer products that serve multiple infrastructure subsectors. The Environmental Solutions Group is the largest manufacturer of dump trucks in the United States. They also manufacture street sweepers, sewer cleaners and industrial vacuum loaders, safe-digging and road-marking equipment. The Safety and Security Systems Group provides technology and systems used by first responders and industrial facilities to protect lives and property.

Federal Signal delivers a comprehensive suite of equipment designed to support a wide range of IIJA-funded project areas, as highlighted in the table below.

Cementing a provider of construction materials

Large scale infrastructure projects such as bridges and transit require longer planning and often are fully realized toward the tail end of the spending period. Global Alpha is positioned through Eagle Materials Inc. (EXP US), an important producer of cement, to strategically capture the roughly USD550 billion allocated for new construction materials.

Eagle Materials possesses regional market dominance: The company’s 70+ facilities are concentrated in the US Heartland, Sun Belt and Mountain West. These inland markets are protected by high transportation costs, which limit competition from cheaper foreign imports.

Between 2024–2025, Eagle invested heavily in modernizing plants like the Laramie, Wyoming facility, increasing cement output by 50% specifically to meet the rise in IIJA-funded municipal projects. Within the same time frame, Eagle converted nearly 100% of its cement capacity to Portland Limestone Cement (or PLC). This low-carbon product is increasingly required for government-funded projects that prioritize environmental sustainability.

Strategically, the company shifted its sales mix toward non-residential and public infrastructure, sectors projected to grow by roughly 5% in 2026, to offset recent softening in the residential housing market.

Global phenomena

Civil infrastructure is being accelerated on a global basis; China spent USD550 billion on transport infrastructure in 2025 alone. Japan just began a USD140 billion mid-term plan for the implementation of national resilience. Global Alpha is exposed to global civil infrastructure buildout through Sany Heavy Equipment International Holdings Co. Ltd. (631 HK).

Hong Kong-listed Sany is the world’s third-largest heavy equipment manufacturer. Their equipment is designed with a focus on being “easy to own, easy to operate and easy to service,” prioritizing essential functionality over excessive technical complexity. The company is also a global leader in concrete machinery, especially after acquiring the legendary German brand Putzmeister. Products include truck-mounted pumps, stationary pumps and concrete mixers. Large-scale engineering contractors account for approximately 45% of Sany’s revenue.

That demand is increasingly coming from outside China: overseas markets now contribute 64% of revenue, led by Africa, where sales surged 55% on the back of infrastructure buildouts. To capitalize on this momentum, Sany has shifted its mix toward infrastructure-heavy “civil works” applications, helping drive a 41% increase in net profit in 2025.

Keeping assets clean, clear and operational

Global Alpha also holds Bucher Industries AG (BUCN SW), a Swiss industrial group that provides specialized machinery and components for essential infrastructure, specifically through its Bucher Municipal and Bucher Hydraulics divisions. Unlike heavy civil construction firms, Bucher focuses on the maintenance, cleaning and operational safety of existing civil assets.

Bucher’s connection to civil infrastructure is primarily functional, ensuring that public and commercial traffic areas remain operational and safe. For sewer and drainage infrastructure, Bucher produces specialized sewer cleaning and water recycling units essential for managing urban water networks and preventing flash flooding on major roadways. Bucher also provides construction site support through its heavy-duty sweepers, specifically engineered to handle the abrasive materials (e.g., aggregate, spoil) found on large-scale infrastructure construction sites.

Civil infrastructure is more than a standalone spending category – it is the operating backbone that enables other critical buildouts, from power and water management to digital connectivity. For Global Alpha, this creates diversified, real-economy exposure to long-duration public investment, spanning both new construction and the ongoing maintenance that keeps cities functioning.

The post Infrastructure investment: The tools, materials and makers powering civil works appeared first on Groupe financier Connor, Clark & Lunn ltée.

The stockbuilding cycle is a repeating fluctuation in the demand for production inputs and goods for final sale caused by inventories periodically over- and undershooting the level desired by manufacturers and distributors.

The approach here is to monitor the cycle using measures of the rate of change of G7 stockbuilding from national accounts data and business surveys.

The national accounts measure places the last cycle low in Q1 2023, implying that the current cycle is well-advanced – see chart 1.

Chart 1

The business survey measure is more timely and recently crossed below zero, consistent with the cycle moving into a downswing.

The original research on the cycle – by Joseph Kitchin, published in 1923 – used data on commodity prices, bank clearings and interest rates. Kitchin attributed the cycle to “psychological causes”, making no explicit link with inventory behaviour.

The cycle is evident in commodity prices because changes in demand for production inputs affect their price as well as volumes – chart 2.

Chart 2

Tech investors often dismiss the cycle as an “old economy” phenomenon but electronic components are a key production input subject to the same inventory-related demand swings as traditional industrial commodities.

There is no single price index capturing the changing nature of electronic components. However, export prices of key supplier economies are a rough proxy. Chart 3 shows that the annual rate of change of an average of Taiwanese and Korean export prices in US dollars tracks the national accounts-based measure of G7 stockbuilding changes.

Chart 3

Chart 4 overlays the annual rate of change of an average of 12-month forward earnings estimates, showing a similarly significant correlation.

Chart 4

Based on the cycle assessment here, the implication is that momentum of component prices and earnings should be at or close to a peak.

Why could this prove wrong? One possibility is that the current stockbuilding cycle will extend. This cycle is judged to be the last of a set of five constituting the current housing cycle (which began in 2009). Final cycles tend to be longer than the 3.5-year average, with one recent example (1986-91) reaching 4.5 years. The next low, therefore, could be delayed until H2 2027, in turn suggesting a later start to the downswing.

Another counter-argument is that strong demand for components is being driven by an ongoing upswing in the business investment cycle – narrowly focused on AI-related spending in the current cycle – as well as peak stockbuilding. This cycle last bottomed in 2020 and has ranged between 7 and 11 years historically, so the upswing could – in theory – continue for several more years. The thinking here is that the current cycle is more likely to be short, reflecting a long prior cycle (11 years) and a drag from the expected stockbuilding downswing.

The post Semis and the stockbuilding cycle appeared first on Groupe financier Connor, Clark & Lunn ltée.

The stockbuilding cycle is a repeating fluctuation in the demand for production inputs and goods for final sale caused by inventories periodically over- and undershooting the level desired by manufacturers and distributors.

The approach here is to monitor the cycle using measures of the rate of change of G7 stockbuilding from national accounts data and business surveys.

The national accounts measure places the last cycle low in Q1 2023, implying that the current cycle is well-advanced – see chart 1.

Chart 1

The business survey measure is more timely and recently crossed below zero, consistent with the cycle moving into a downswing.

The original research on the cycle – by Joseph Kitchin, published in 1923 – used data on commodity prices, bank clearings and interest rates. Kitchin attributed the cycle to “psychological causes”, making no explicit link with inventory behaviour.

The cycle is evident in commodity prices because changes in demand for production inputs affect their price as well as volumes – chart 2.

Chart 2

Tech investors often dismiss the cycle as an “old economy” phenomenon but electronic components are a key production input subject to the same inventory-related demand swings as traditional industrial commodities.

There is no single price index capturing the changing nature of electronic components. However, export prices of key supplier economies are a rough proxy. Chart 3 shows that the annual rate of change of an average of Taiwanese and Korean export prices in US dollars tracks the national accounts-based measure of G7 stockbuilding changes.

Chart 3

Chart 4 overlays the annual rate of change of an average of 12-month forward earnings estimates, showing a similarly significant correlation.

Chart 4

Based on the cycle assessment here, the implication is that momentum of component prices and earnings should be at or close to a peak.

Why could this prove wrong? One possibility is that the current stockbuilding cycle will extend. This cycle is judged to be the last of a set of five constituting the current housing cycle (which began in 2009). Final cycles tend to be longer than the 3.5-year average, with one recent example (1986-91) reaching 4.5 years. The next low, therefore, could be delayed until H2 2027, in turn suggesting a later start to the downswing.

Another counter-argument is that strong demand for components is being driven by an ongoing upswing in the business investment cycle – narrowly focused on AI-related spending in the current cycle – as well as peak stockbuilding. This cycle last bottomed in 2020 and has ranged between 7 and 11 years historically, so the upswing could – in theory – continue for several more years. The thinking here is that the current cycle is more likely to be short, reflecting a long prior cycle (11 years) and a drag from the expected stockbuilding downswing.

The post Semis and the stockbuilding cycle appeared first on Groupe financier Connor, Clark & Lunn ltée.

L’infrastructure numérique est un sujet de plus en plus souvent abordé dans les discussions sur l’investissement institutionnel. Dans un récent article de Benefits and Pensions Monitor, « Is it time to embrace digital infrastructure? », les directeurs généraux Kaitlin Blainey et Andrew Parkes ont été interviewés dans le but d’exposer la façon dont les investisseurs abordent ce segment en croissance rapide et son incidence sur la construction de portefeuille.

La façon dont l’infrastructure numérique se pose comme complément, et non comme remplacement, des portefeuilles d’infrastructure traditionnels est mise en évidence. À mesure que la demande des investisseurs pour des actifs essentiels de longue durée augmente, l’infrastructure numérique s’harmonise de plus en plus aux caractéristiques défensives et axées sur le revenu longtemps associées à une plus vaste catégorie d’actifs.

L’article reflète également l’importance croissante de l’expertise au-delà de la seule sélection des actifs. L’infrastructure numérique peut jouer un rôle stratégique au sein de portefeuilles institutionnels diversifiés, en particulier lorsque les investisseurs soupèsent les considérations relatives à l’adaptabilité, à la résilience et au déploiement de capitaux à long terme.

Lire l’article complet (en anglais)

The post CC&L Infrastructure discute de l’infrastructure numérique et de sa place dans les portefeuilles de placement institutionnels appeared first on Groupe financier Connor, Clark & Lunn ltée.

Digital infrastructure is becoming an increasingly prominent topic in institutional investment discussions. In a recent Benefits and Pensions Monitor article, “Is it time to embrace digital infrastructure?”, managing directors Kaitlin Blainey and Andrew Parkes were interviewed, exploring how investors are approaching this fast‑growing segment and what it could mean for portfolio construction.

Highlighted in the piece is how digital infrastructure is being viewed as a complement to traditional infrastructure portfolios rather than a replacement. As investor demand for essential, long-duration assets grows, digital infrastructure is increasingly seen as aligned with the defensive and income-oriented characteristics long associated with the broader asset class.

The article also reflects the growing importance of expertise beyond asset selection alone. Digital infrastructure can play a strategic role within diversified institutional portfolios, particularly as investors weigh considerations around scalability, resilience and long-term capital deployment.

Read the full article

The post CC&L Infrastructure discusses digital infrastructure and how it fits into institutional investment portfolios appeared first on Groupe financier Connor, Clark & Lunn ltée.

“The world is always changing.” – Sir John Templeton

Few areas illustrate this better than institutional investing. Nearly three decades ago, I moved from the UK to Canada, and over this time I have had a front-row seat to a remarkable transformation in the Canadian investment landscape, spanning defined benefit (DB) plans, public funds, endowments and foundations and increasingly, defined contribution (DC) investors. This personal reflection is not just a story about what changed, but on what truly matters: the lessons institutional investors should carry forward.

Canadian DB, public fund, endowment and foundation investors

Governance determines outcomes

Investment outcomes improve materially when investment decision‑making is insulated from political or sponsor influence. Canada’s experience offers a powerful example. In 1997, the establishment of the Canada Pension Plan Investment Board (now named CPP Investments) as an independent, arm’s‑length organization marked a defining shift in Canadian pension governance.

Prior to this reform, the Canada Pension Plan (CPP) operated largely on a pay‑as‑you‑go basis with limited reserves. The change was gradual, initially funded primarily through annual contributions and invested mostly in passive public equities. However, the move to independent governance fundamentally changed the trajectory of the fund, enabling better diversification, greater transparency and long‑term financial sustainability. The result was a globally respected investment organization that has helped secure CPP benefits for future generations, while avoiding far steeper contribution increases.

Removing constraints enables better outcomes

In 1996, Canadian institutional investors still operated under the foreign property rule, which limited direct foreign investment in tax‑deferred accounts to 20%, despite alternative fund structure or the use of synthetic or derivative workarounds. The result was forced concentration in Canadian assets, elevating domestic economic and market risk and allowing regulation, rather than portfolio theory, to drive long‑term asset allocation decisions.

The full elimination of the rule in 2005 marked a critical turning point. By removing political constraints from portfolio construction, investors gained flexibility to pursue broader global diversification.

Risk always shows up – eventually

The past 30 years have delivered no shortage of defining risk events: the dot‑com boom and bust, the global financial crisis (GFC), the COVID‑19 shock, the inflation‑driven rate hikes of 2022 and ongoing geopolitical volatility. Each episode reinforced the same truth: risk may remain hidden for long periods, but it always emerges.

The dot‑com collapse sharpened DB sponsors’ understanding of asset–liability relationships, accelerating the adoption of liability‑driven investing, particularly among corporate plans. It also marked the beginning of broader diversification through alternatives, led by Canada’s large public funds. Investment policies became more formal, disciplined and explicitly risk‑focused.

The GFC shifted attention to liquidity risk, especially within less-liquid alternative strategies. While the COVID shock produced extreme but short‑lived liquidity stress, it once again exposed mismatches between portfolio liquidity and investor needs.

The next major shock to impact investors was the rapid rate hikes in 2022 to address rising inflation, which saw both equity and fixed income markets decline. There were several consequences depending on the type of investor and investment strategy. First, absolute total portfolio returns were generally negative. However, the rapid rise in interest rates created a different kind of outcome, such as many DB plans experiencing improved funded status with higher discount rates reducing the value of liabilities.

At the same time, the denominator effect increased allocations to alternatives, further highlighting the importance of liquidity management, rebalancing discipline and tactical flexibility. The impact was particularly pronounced for corporate DB plans pursuing de‑risking through annuity purchases, since funding typically had to be sourced from public market liquid assets, which unintentionally further increased the overweight to less‑liquid alternatives.

Manage risk, not just asset allocation

Three decades of market stress have delivered a consistent message for institutional investors: problems arise from unmanaged risk, not from imperfect asset allocation. Asset allocation reflects expectations about how markets should behave. Risk reflects reality and prepares portfolios for when markets behave differently.

The most consequential risks do not appear clearly in asset allocation frameworks. Liquidity constraints, embedded leverage, hidden concentrations, implementation gaps and governance weaknesses often sit beneath the surface, only revealing themselves during periods of stress.

Figure 1: Hidden risks beyond asset class allocations

This reality has driven growing interest in a total portfolio approach (TPA) to managing portfolios. By viewing the portfolio as a single, integrated system rather than a collection of asset class silos, a TPA allows decisions to be evaluated based on their marginal contribution to total portfolio risk and return.

The traditional strategic asset allocation (SAA) framework remains a widely adopted approach for developing long-term investment strategies, since its appeal lies in its intuitive structure and the quantitative discipline it brings to forecasting returns, volatility and correlations across asset classes. However, a critique of the SAA approach is the disconnect between asset allocation design and manager selection, since the processes are often conducted separately, which can lead to an understatement of the overall risk being adopted.

The growth of delegated investment structures

The COVID period exposed a reality many institutional investors had been grappling with for years: limited internal resources and the difficulty of responding quickly to changing market dynamics. At the same time, portfolio strategies were becoming more complex as investors diversified and governance demands increased.

In response, many plans have turned to delegated investment structures, most commonly the Outsourced Chief Investment Officer (OCIO) model, to support oversight, risk management and implementation. When thoughtfully designed, these structures can reduce governance burden, enable timelier decision‑making and improve execution relative to traditional committee‑driven models.

Today, investment managers and consultants offer sophisticated delegated platforms that allow institutions to remain focused on long‑term strategic objectives rather than day‑to‑day implementation. For example, these platforms have allowed smaller and mid-sized endowment and foundation investors to build diversified portfolios that increasingly resemble those of much larger institutional peers.

While delegation enhances governance efficiency, it does not replace fiduciary responsibility. Outsourcing decision‑making should never be confused with outsourcing accountability.

Responsible investing enters mainstream

Over the past decades, responsible investing has shifted from a secondary consideration to a core element of mainstream investment practice. Environmental, social and governance (ESG) factors are now widely recognized as financially material risks and opportunities, shaped by fiduciary duty, regulatory expectations and client demand.

This evolution was largely asset‑owner led. As investors increasingly asked how ESG risks were identified and managed, investment managers responded by embedding ESG analysis into portfolio construction and linking stewardship and voting to long‑term value creation.

What began in public equities has since expanded across fixed income and alternative assets, where ESG considerations are now evaluated alongside traditional investment risks. As ESG has gained prominence, it has also attracted political and cultural scrutiny, particularly in the US. Much of the resulting backlash reflects confusion and imprecise language, rather than a rejection of responsible investing itself.

The power of three: governance, flexibility, and risk management

Across three decades of market shocks, regulatory change and structural evolution, the message for institutional investors has been consistent: success has not come from perfectly forecasting markets or optimizing asset class weights, but from building governance frameworks that recognize risk early, respond decisively and endure through stress.

Where governance has been strong, constraints are removed and accountability clear, outcomes have improved. Where risk has been ignored, hidden or deferred, it has inevitably re-emerged, often at the worst possible moment.

The defining challenge for investors today is not complexity, but responsibility. Delegation, diversification and responsible investing are tools, not substitutes, for judgment and oversight. Managing risk requires seeing the portfolio as an integrated whole, understanding how decisions interact and ensuring that structures evolve as markets do.

Investors are not rewarded for what they intend, but for what they govern. Those who focus on monitoring and managing risk will be best positioned to deliver resilient outcomes in the next market cycles and future decades.

Canadian DC investors

Hidden cost of simplicity

In the mid‑1990s, many large private‑sector employers closed their DB plans to new entrants. The goal was to reduce balance‑sheet volatility and make retirement costs more predictable. But this shift had a profound consequence, with the investment and retirement security risk moving from the sponsor to the individual member.

The design of early DC plans reflected investment menus that were intentionally simple: a balanced fund, Canadian equity, foreign equity and fixed income funds. Members were given choice, but little guidance. At the time, simplicity was seen as prudence. In hindsight, it exposed a fundamental flaw regarding how member behaviour can lead to sub-optimal outcomes.

Investment risk is tangible for DC plans too

The dot‑com bubble was the first true stress test for modern DC plans, and it exposed a fundamental weakness in early plan designs. For many members, this was their first experience with meaningful market losses. Unlike DB plans, there was no sponsor balance sheet to cushion the impact or smooth outcomes over time. Losses were felt directly and immediately by individual members.

The experience made investment risk tangible for DC members. What emerged was not simply a lesson about volatility, but one about behaviour. Most DC members remain disengaged during normal market environments, allowing risk exposures to drift unnoticed.

When markets fall, engagement spikes, but often in the worst possible way. Members react by reducing risk or moving to cash, locking in losses just as recovery potential is greatest.

Default options and education became essential

The dot‑com crash marked a turning point in the evolution of DC plans. It exposed the limits of member‑directed choice and accelerated a structural redesign that shifted responsibility back toward plan sponsors and professional portfolio construction.

What became clear was that choice without context creates risk. When members are asked to make complex investment decisions without guidance or safeguards, behavioural biases dominate. Subsequent market shocks, most notably the GFC, reinforced this lesson, particularly as members approached retirement and sequencing risk became an issue.

In response, plan sponsors increasingly adopted default investment solutions, most notably target‑date and lifecycle funds. These portfolios diversified risk across asset classes and gradually reduced equity exposure as participants aged, directly addressing behavioural and timing risks.

For members who continued to self‑direct, sponsors enhanced education and decision‑support tools, shifting from technical disclosures to plain‑language materials and practical online tools. Over time, default solutions proved effective and target‑date and lifecycle funds have come to dominate DC assets.

Decumulation, the real measure of success

DC plans do not succeed when participants retire with large balances. They succeed when those balances deliver reliable income for life. Yet DC design effort often stops at accumulation.

Target‑date funds are optimized to grow assets, not to manage the more fragile transition into retirement. As members reach retirement, this imbalance becomes the central risk.

Unlike their DB counterparts, DC plans place the responsibility for managing longevity, market, inflation and sequencing risks on individuals, making the years immediately before and after retirement especially important, when individual investment balances are at their peak.

Without a deliberate decumulation strategy, even disciplined saving can result in disappointing retirement outcomes. Decumulation is the critical phase of a DC plan and a growing governance responsibility for sponsors. How savings are converted into income and how long that income lasts, ultimately determines whether members experience financial security in retirement.

Progress has been made, but still more to do

The Canadian DC market has evolved from a low-cost DB replacement into a more sophisticated, but still incomplete retirement system where design, defaults and decumulation can matter more than choice.

History has made one lesson unmistakably clear: risk does not disappear simply because it is individualized. When DC plans emphasize simplicity without structure, or choice without guidance, they do not empower members, they expose them.

The real responsibility of modern DC design is not to maximize optionality, but to manage the risks that could undermine retirement outcomes: behavioural errors, poor timing and an unmanaged transition into retirement.

Default solutions, thoughtful education and deliberate decumulation frameworks are the mechanisms that can turn savings into retirement security. Ultimately, DC plans will be judged not by account balances at retirement, but by the income they deliver after it.

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