Money managers are betting on the ongoing need to upgrade and expand the world’s infrastructure to accommodate the growing global economy and rising population. Exchange traded fund investors can also tap into this industry through infrastructure sector-specific strategies.
Private-equity firms have raised a record $68.2 billion for infrastructure investing for the first three quarters of the year, up 18% over the same period last year and surpassing the $66.2 billion for all of 2016, the Wall Street Journal reports.
Institutional investors like pension funds have been funneling more money to infrastructure as they bet on the industry’s reputation for steady returns, which are typically seen as a good compromise between safer fixed-income securities and riskier private equity. The infrastructure investment outlook is also especially appealing with interest rates still hovering near historically low levels and stock prices trading around all-time highs.
Trump’s $1 trillion plan for U.S. infrastructure
The money managers are anticipating the potential investments needed to update aging infrastructure or expanding the economic backbones to meet rising growth. For example, President Donald Trump campaigned on a promise to enact a $1 trillion plan for U.S. infrastructure and announced a proposal earlier this year, but he faced congressional opposition from the start due to the requirement that states and cities would have to make up the money on their own.
“In the end, the reality is that U.S. infrastructure is still woefully maintained,” Mark Weisdorf, the former chief executive of the infrastructure-investments platform at J.P. Morgan Asset Management, told the WSJ. “Eventually stuff gives and things happen. That catalyst may still come.”
Investors who are interested in gaining exposure to the broad infrastructure sector can take a look at a number of ETF options available.
For example, the iShares Global Infrastructure ETF (NYSEArca: IGF), SPDR FTSE/Macquarie Global Infrastructure (NYSEArca: GII), ProShares DJ Brookfield Global Infrastructure ETF (NYSEArca: TOLZ), Invesco S&P High Income Infrastructure ETF (NYSEArca: GHII) and FlexShares STOXX Global Broad Infrastructure Index Fund (NYSEArca: NFRA) provide broad global infrastructure sector exposure. Additionally, the iShares S&P Emerging Markets Infrastructure Index Fund (NYSEArca: EMIF) and Invesco Emerging Markets Infrastructure ETF (NYSEArca: PXR) can provide more targeted exposure to the emerging market infrastructure segment.
For more information on the infrastructure sector, visit our infrastructure category.