Global infrastructure exchange traded funds may be a good way for investors to capture the a boom in global spending and to generate attractive yields.
Infrastructure spending is expected to rise to over $9 trillion per year by 2025, compared to $4 trillion in 2012, writes Joshua Duitz, senior portfolio manager at mutual fund provider Alpine Woods Capital Investors, for InvestmentNews. Over the next decade, total spending on transportation, power generation, telecommunications networks, public facilities and other infrastructure could top $78 trillion.
“While this building boom potentially will drive economic growth and job creation in many regions, it can have an equally powerful effect in building wealth for investors who make infrastructure a core holding in their portfolios,” Duitz said.
Fueling growth in the infrastructure sector, much of the expected growth in spending will come out of Asia-Pacific region where countries are trying to meet the rising needs of an emerging middle-class and increasing urbanization. Meanwhile, in more developed countries, like the U.S., aging airports, roads, bridges and power grids are in need of an upgrade.
Since most infrastructure projects are structured with specific revenue-generation components, the asset can provide attractive income-generating opportunities.
“Yield is produced by a relatively dependable stream of income from toll road concessions, water usage charges, airport landing fees, etc. This makes allocating to infrastructure funds a logical choice for investors who want to invest globally and yet also receive dividends or income,” Duitz added.
Investors interested in the infrastructure theme may consider a number of ETF options.