International government stimulus plans are pouring billions of dollars into infrastructure projects such as new bridges, roads and tunnels. Will related global infrastructure exchange traded funds (ETFs) be a smart choice for investors’ portfolios?
Murray Coleman for Index Universe reports that sovereign wealth funds around the world have been busy doling out billions more to revive markets outside the United States, leading to prospects of an international infrastructure boom.
Analysts feel that this investment in infrastructure projects both in developed and emerging markets will be a driver of continued economic expansion. ETFs can help give the desired exposure, but with the safety in numbers approach, of a mixed bag of a number of companies. Two to consider are:
- PowerShares Emerging Markets Infrastructure ETF (PXR): up 62.8% year-to-date
- iShares S&P Global Infrastructure Fund (IGF): up 6.8% year-to-date
- SPDR FTSE/Macquarie Global Infrastructure 100 (GII): up 0.7% year-to-date
PXR’s portfolio is investing in raw materials producers who are positioned to benefit from shovels-in-the-ground projects, which is directly related to the commodities markets. Industrials and utilities play another huge role in this fund.
IGF divides the sector into three component groups: energy, transportation and utilities. When it rebalances once a year, the weightings are adjusted to 40% each for utilities and transportation, with 20% going to energy. Lately, utilities have dominated the mix. The developed markets are more of a focus within this fund.
GII has 107 components, divided among utilities, energy and industrials. Utilities clock in at 87.2% of the fund, while energy and industrials are respectively 5.7% and 2.8%. Developed markets make up most of the fund, but Brazil, Korea and China are components.
Before investing in an infrastructure ETF, be sure to do your homework and figure out exactly what “infrastructure” refers to according to each fund.
For more stories about global infrastructure, visit our infrastructure category.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.