In a report out Wednesday, the American Society of Civil Engineers (ASCE) graded U.S. infrastructure a C-. That’s actually an improvement from recent years, but still extremely poor, which adds fuel to the FlexShares STOXX Global Broad Infrastructure Index Fund (NYSEArca: NFRA) fire.
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 both traditional and non-traditional infrastructure sectors.
Investors considering NFRA or any other infrastructure asset are betting this time will be different when it comes to policy execution under President Biden.
“For the first time in 20 years, our infrastructure GPA is a C-, up from a D+ in 2017. This is good news and an indication we’re headed in the right direction, but a lot of work remains,” the ASCE report said.
Room for Improvement = NFRA Opportunity
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.
“Five category grades — aviation, drinking water, energy, inland waterways, and ports — went up, while just one category — bridges — went down. And stormwater infrastructure received its first grade: a disappointing D. Overall, eleven category grades were stuck in the D range, a clear signal that our overdue bill on infrastructure is a long way from being paid off,” according to the ASCE.
Investors should consider infrastructure sector-specific exchange traded funds after President Joe Biden recently laid out plans to upgrade aging U.S. infrastructure.
Biden plans to ask Congress this month to heavily invest in infrastructure projects as half of U.S. roads are in poor or mediocre condition and more than a third of U.S. bridges are in need of repair, replacement, or significant restoration, Reuters reports.
“The latest grade comes as President Joe Biden and the Democratic-run House and Senate plan to push for massive infrastructure spending after the latest COVID-19 aid package is enacted later this month. Biden has begun to intensify his “Build Back Better” pitch on infrastructure after campaigning on improving U.S. roads and bridge,” according to MarketWatch.
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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.