Infrastructure spending is again receiving attention on Capitol Hill and in other markets around the world. Investors looking to capitalize on this theme have plenty of exchange traded funds to consider, including the AGFiQ Global Infrastructure ETF (GLIF), a new addition to the infrastructure ETF fray.
The AGFiQ Global Infrastructure ETF uses a multi-factor investment process to seek long-term capital appreciation by investing primarily in global equity securities in the infrastructure industry.
In the infrastructure space, there is a never-ending need for investments to update or repair aging communication, transportation, water and energy networks. According to American Society of Civil Engineers, existing U.S. infrastructure is crumbling and in need of major investment. Additionally, infrastructure as an asset class has long-term viability.
Many view the infrastructure sector as an alternative asset that can help investors diversify a stock and bond portfolio due to the sector’s lower correlation to traditional assets.
The Building Blocks of GLIF ETF
GLIF uses a proprietary, multi-factor quantitative model to evaluate securities of issuers in the infrastructure group of industries by evaluating and ranking equity securities based on factors that identify growth, value, quality and risk characteristics, according to the fund’s prospectus.
Infrastructure developments are typically large, long in duration and capital-intensive, carrying a high overall cost. Nevertheless, the projects compensate investors by including fairly predictable expenditures to maintain the asset, as well as regulated pricing that typically provides stable and reliable cash flows. Select investors have long enjoyed the unique characteristics of infrastructure to diversify equity risk exposure, generate income and hedge against long-term inflation.
GLIF is a global ETF, but its geographic volatility is somewhat limited because about two-thirds of its weight is allocated to U.S. and Canadian stocks. Eight of its top 10 geographic weights are developed markets.
Home to utilities stocks, real estate investment trusts (REITs) and master limited partnerships (MLPs), among other assets, GLIF is also a credible income idea.
“Global infrastructure yields were recently about 3.5%, well above the S&P 500’s 2%,” according to Barron’s. “The reason those yields aren’t higher, of course, is that these companies have to make huge investments in everything from ramping up 5G wireless networks to renewable energy to pipelines. But 3.5% isn’t shabby.”
For more information on the infrastructure sector, visit our infrastructure category.