Developing economies have been stumbling, but infrastructure-related exchange traded funds could provide a more stable play on the emerging markets as countries update their basic transportation framework.
“Spending on global infrastructure depends on two things: local economic growth and government spending,” according to Morningstar analyst Robert Goldsborough. “Both dynamics can be at risk based on certain macroeconomic trends. Local economic growth, especially in emerging-markets countries, can drive infrastructure investments.”
Roger Nusbaum for TheStreet points out that that investors should consider emerging-market infrastructure funds as we look at “where the money is being spent.”
ETF investors can take a broad approach to emerging market infrastructure names through the iShares S&P Emerging Markets Infrastructure Index Fund (NYSEArca: EMIF) or PowerShares Global Emerging Markets Infrastructure Portfolio (NYSEArca: PXR).
EMIF features a 38.4% weight to transportation, 25.2% electric utilities and 12.5% power producers and energy traders, primarily following cash flow companies of infrastructure like airports, toll roads and energy transportation, which provides the ETF with a decent 3.08% 12-month yield.
PXR has large allocations to the slightly riskier industrials 50.1% and materials 46%, making it more volatile than EMIF.