Investors can turn to exchange traded funds to track the expansion of U.S. infrastructure, even if the incoming Joe Biden administration doesn’t make good on plans for increased fiscal spending.
President-elect Joe Biden promised on the campaign trail to push through a $2 trillion plan to upgrade the country’s infrastructure and combat climate change by rebuilding roads and bridges, eliminating carbon emissions from the power grid, putting more Americans in electric vehicles, and funding zero-emissions mass transit, the Wall Street Journal reports.
There is a possibility that a divided Congress with a Republican-controlled Senate may thwart Biden’s spending plans. Furthermore, many investors have already been burned after President Donald Trump promised trillions of dollars in infrastructure spending that never panned out.
“There’s been a significant hope for infrastructure for half a decade now,” DJ Gribbin, who served as President Trump’s infrastructure adviser, told the WSJ. “The problem with infrastructure is that everyone says, ‘I would like infrastructure.’ And then you ask them what they mean by that, and they all have different things in mind.”
Nevertheless, private infrastructure investments have continued to push forward. In 2021, there have been $88.9 billion in infrastructure deals across North America through Dec. 8, and more is expected. Private-equity firms have already broken records for 2020 in North America-focused infrastructure fundraising, accumulating $52.3 billion so far, according to Preqin data, or $1 billion more than in all of 2019, the previous record.
The areas with the greatest investments have been in digital and communications infrastructure, renewable energy, and ports.
“Power and renewables has been very big, despite an administration that has not necessarily supported it,” Nasir Khan, head of infrastructure for the Americas at French investment bank Natixis SA, told the WSJ. “People see it as a natural progression.”
As a way to capture this increased spending, investors can look to infrastructure sector-focused ETFs. For example, the Global X U.S. Infrastructure Development ETF (PAVE) tries to reflect the performance of the Indxx U.S. Infrastructure Development Index, which is comprised of companies focused on domestic infrastructure development, including those involved in construction and engineering; production of infrastructure raw materials, composites, and products; industrial transportation; and producers/distributors of heavy construction equipment.
One other fund to consider is the iShares U.S. Infrastructure ETF (Cboe: IFRA), which tracks the NYSE FactSet U.S. Infrastructure Index and provides access to two groups of infrastructure companies that are equally weighted: owners and operators, such as railroads and utilities, and enablers, such as materials and construction companies.
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