Global infrastructure sector-related exchange traded funds may help diversify a stock portfolio as inflation picks up ahead, but investors should keep in mind currency risks when exposed to the fluctuating foreign exchange market.
Investors should consider incorporating the often overlooked real asset category to help diversify an investment portfolio, Robert Bush, ETF Strategist at Deutsche Asset Management, said in a note.
Real assets are comprised of “tangible, physical assets, such as transportation or communication infrastructure, residential, commercial or industrial real estate; or often a commodity or energy linked asset,” Bush said. “Such assets frequently have high barriers to entry because of their physical size, the upfront capital required to create them, or the regulatory framework within which they operate (think of power plants, or airports, for example).”
These areas can also benefit from inelastic demand due to the essential services they provide and from contractual pricing and margin mechanisms that come from operating fixed utilities, tolls and bridges.
[related_stories]Bush argued that by gaining exposure to infrastructure stocks, investors can hedge against inflation, diversify a portfolio and generate attractive yields.