With the House recently passing a $1.5 trillion infrastructure bill that would sharply increase spending on roads and transit, push for deep reductions in pollution, direct billions to water projects, affordable housing, broadband and schools, and upgrade hospitals and U.S. Postal Service trucks, there has been a spike in interest in ETFs that allow investors to allocate a portion of their portfolios to infrastructure.
House Speaker Nancy Pelosi (D-Calif.) said Democrats were following through on a promise to rebuild America with “green, resilient, modern and job-creating infrastructure,” adding that the Moving Forward Act “shows that everything in our country is connected, from the education of our children to the technologies of the future to the road map to get there.”
The bill is also intended partly to deal with the expiration of a law authorizing spending on highways, transit and other transportation programs set to occur in September. Flexshares investment strategist Chris Huemmer sees the case for pursuing infrastructure as an investor despite the fate of this most recent bill.
“We always see bipartisan support for infrastructure spending simply because it’s way to generate jobs growth,” said the senior investment strategist at Flexshares ETFs in an interview with ETFs Trends’ Brenton Garen recently.
“When I talk to investors I am often emphasizing that they do not wait on a resolution from Congress and look to investment in infrastructure through the public markets because they’re often surprised at the amount of infrastructure assets that are available to invest in,” Huemmer said in the interview.
Huemmer explained that some of the largest airports and seaports throughout the world are all public securities, which makes them something that investors could consider for portfolio diversification, which provides a lower correlation to equity and fixed income markets.
He mentioned that there are other reasons to invest in infrastructure in addition to portfolio diversification though.
“Because infrastructure assets tend to be these mission critical services that are needed by everyday individuals whether we’re in a booming economy or struggling a little bit like we are today, everybody needs access to water waste management, particularly in the stay at home environment,” Huemmer explained.
It is also key to be, “able to access information via the Internet because their infrastructure assets tend to be defensively positioned and do well when we have increases in volatility as when there’s downward pressure on markets,” he said.
Finally, with low interest rates like we have right now, infrastructure is also helpful as a source of dependable income, explained Huemmer.
The FlexShares STOXX Global Broad Infrastructure Index Fund (NFRA), “allows investors to capture the wide swath of infrastructure assets, not just utilities, the pipelines, the traditional transportation that normally see, but things like cellular towers data centers, hospital post office is around the globe, and give investors access to all disaster classes in one fund,” according to Huemmer.
For ETF investors looking to incorporate infrastructure assets into their portfolios, NFRA might be a good place to start.
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