Enthusiasm for the FlexShares STOXX Global Broad Infrastructure Index Fund (NYSEArca: NFRA) and other infrastructure exchange traded funds may feel like it’s waning, but investors shouldn’t be fooled. In today’s low yield environment, NFRA still merits consideration.
NFRA tries to reflect the performance of the STOXX Global Broad Infrastructure Index, which identifies equities that derive the majority of revenue from infrastructure business, providing exposure to not only infrastructure sectors, but non-traditional ones as well. Investors considering NFRA or any other infrastructure asset are betting this time will be different when it comes to policy execution and implementation.
“Infrastructure isn’t entirely the province of large institutional investors who can get in on the ground floor through various private-equity deals. These days, individual investors can take a swing at renewable energy, toll roads, airports, and other infrastructure endeavors through individual stocks and an expanding selection of mutual funds,” reports Lawrence Strauss for Barron’s.
Pulling Apart the NFRA ETF Thesis
NFRA’s index focuses on long-lived assets in industries with very high barriers to entry, with at least 50% of their revenue from key sectors with a 3-month average daily trending volume of at least $1 million. The portfolio is weighted based on a free-float market cap with certain constraints to limit exposure in any one security, sub-sector, or country. The fund is rebalanced annually.
“The desire for a big infrastructure-spending initiative has been discussed in Washington for many years, and President Biden could make it a top priority early in his tenure, given Democratic control of Congress. So, now is the time for income investors to do due diligence on their options,” adds Barron’s.
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 significant need for near-term infrastructure spending. NFRA will be ready.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, 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.