There are several reasons to be excited about infrastructure in the equity market. ETF Trends spoke with Bill DeRoche, Chief Investment Officer for AGF Investments LLC, and Head of AGFiQ Alternative Strategies about their recent announcement concerning the infrastructure spending plan and how the AGFiQ Global Infrastructure ETF (GLIF) will prove to be valuable.
From a macro perspective, DeRoche notes how there has been a strong voice for the need to increase infrastructure spending. It’s a sector that’s been proven to keep the world economy growing for the last few decades. Additionally, based on areas suffering (bridges, electrical grids, etc.), it’s an area that needs investment.
Most infrastructure growth is outside North America, and as a result, by making those investments, it leads to quick diversification and global equities, compared to buying for a more traditional portfolio.
“These things have a real element to them,” DeRoche adds. “It’s not just a business that can be levered up. There are real assets associated with them. Those assets tend to be more sticky as a result. The volatility in this market is a little less than traditional equities. So, When I look at all of this, it causes me to pause and get excited about this particular area, going forward.”
The GLIF Solution
Looking at the impact of GLIF, DeRoch explains how making this fund a success came down to developing it with a basic approach, identifying proper infrastructure assets, and buying them. This was aided with the use of the most commonly used baseline, the Dow Jones Brookfield Global Infrastructure Index. As it’s not an extensive index, the selection universe is fairly concentrated.
For GLIF, as well as the AGFiQ Global Infrastructure ETF/Canada (QIF), the idea was to expand the starting universe. Through that process, it’s led to an increased amount of securities around companies providing capital for infrastructure projects. So, the individual stock by stock analysis makes the universe substantially larger.
DeRoche also notes how they’ve looked at companies whose businesses are relatively diverse but have a reasonably large component associated with infrastructure’s real assets. By approaching it this way, with a larger universe, it means there’s a better selection universe to start with at the end of the day.
This is achieved through the use of a quantitative process, which has been optimized for the various sectors where the typical assets reside. As far as the companies GLIF is trying to predict the returns for, which includes utilities, energy, transportation, telecommunication assets, and some other previously noted financials.
“At the end of the day, we’re trying to create the best trade-off between the expected return that we’re going to hopefully get from an allocation to that particular security, and how much that it brings to the portfolio,” says DeRoche.
The opinions and forecasts expressed herein are solely those of Aaron Neuwirth, 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.
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