Investors seeking income and portfolio diversification may benefit from infrastructure investments.
The FlexShares STOXX Global Broad Infrastructure Index Fund (NFRA) has seen over $97 million in net inflows over a four-week period, more than any other ETF in FlexShares’ lineup, according to VettaFi.
Infrastructure issuers tend to have predictable cash flows, as they provide essential services used in all economic environments. Infrastructure stocks carry both equity and interest rate exposure and can provide an alternative source of income, according to FlexShares.
In 2022, global assets under management for infrastructure investments will reach a record high of $950 billion, according to a report by Boston Consulting Group and EDHECinfra, “Infrastructure Strategy 2022. A Pivot to the Digital Frontier.”
The term infrastructure refers to fundamental facilities and systems that serve a city, an area, or a country. Infrastructure assets are mission-critical capital projects that move people, energy, goods, and data and earn fees for their use through contracts and concessions, according to FlexShares. Some examples of traditional infrastructure projects are bridges, tunnels, toll roads, airports, pipelines, and electric, gas, water, and sewage utilities.
NFRA seeks investment results that generally correspond to the price and yield performance of the STOXX Global Broad Infrastructure Index. The market cap-weighted index invests in companies that derive at least 50% of their revenues from segments including energy, communications, utilities, transportation, and — in an unusual twist — government outsourcing, like hospitals, prisons, and postal services, according to VettaFi.
To maintain diversification, the index imposes certain constraints, such as limits on the overall weighting of each segment. The portfolio is dominated by North American equities, followed by Japan, Australia, and the U.K.
Top holdings include Canadian National Railway, Canadian Pacific Railway, Verizon, Comcast Corporation, and Enbridge. The fund, as of June 28, holds 175 securities — considerably more than its category peers. The fund’s holdings span all market capitalizations, tilting more heavily than the category average toward large-cap companies.
For more news, information, and strategy, visit the Multi-Asset Channel.