With global central bank monetary policies reaching their limits in an attempt to stimulate growth, it may be up to international governments to step in and spend on large infrastructure projects as a means to promote productivity and bolster economic growth.
“After years of extraordinary central bank efforts, monetary policy appears to be reaching its limit in terms of effectiveness,” BlackRock strategists, led by Heidi Richardson, said in a research note. “Governments are now exploring using fiscal policy as an additional measure to stimulate growth. Investing in infrastructure may be the necessary catalyst to increase productivity and help foster job creation. In the near term, equity sectors like industrials and materials may stand to benefit from increased infrastructure spending.”
Investors can potentially capitalize on the growth potential of the infrastructure sector through global sector-specific ETF options that track the transportation, utilities and energy sub-sectors. For instance, the iShares Global Infrastructure ETF (NYSEArca: IGF) is the largest option available, with $1.08 billion in net assets under management. IGF includes a hefty 38.1% tilt toward the U.S. market, along with other foreign countries like Spain 9.2%, Canada 9.1%, Australia 8.7% and Italy 6.2%.
The second largest option, the SPDR FTSE/Macquarie Global Infrastructure (NYSEArca: GII), has $85.3 million in assets under management. Both GII and IGF track the S&P Global Infrastructure Index, so GII’s component holdings and country weights are similar to IGF’s. However, GII has a slightly cheaper 0.40% expense ratio, compared to IGF’s 0.47% expense ratio.
The Guggenheim High Income Infrastructure ETF (NYSEArca: GHII), which is composed of the 50 highest-dividend-paying global infrastructure companies, has been the best performing infrastructure-related ETF of 2016, rising 29.1% year-to-date, compared to IGF’s 16.5% gain and GII’s 16.0% return. GHII also includes a larger U.S. tilt at 52.1% of its portfolio and big 21.2% position in Canadian companies.
Moreover, the infrastructure sector ETFs offer attractive yields for those seeking a little extra income. GHII has a 4.42% 12-month yield, IGF has a 3.06% 12-month yield and GII has a 3.21% 12-month yield.