Election Day is right around the corner and that’s likely to put a brighter spotlight on the infrastructure debate. That could benefit exchange traded funds, including the FlexShares STOXX Global Broad Infrastructure Index Fund (NYSEArca: NFRA).
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.
Obviously, President Trump and former Vice President Joe Biden, the Democratic nominee, have different approaches to the infrastructure issue. One area the president is focusing is efficiency in the permitting process to help projects get across the finish line.
According to Transport Topics: “To build a highway in this country, it could take, in certain places, 18, 19, 20, even 21 years to get approved,” Trump said. “This is not even thinkable. And we’ve got it now down to two, and we’ll have it down to probably one. And it may get rejected for safety reasons or for environmental reasons. That’s OK; it may happen. But we have it down — we will soon have it down to one year from as much as 21 years. We have cases that have just been disastrous.”
The Allure of Long-Lived Assets
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. Additionally, the fund is rebalanced annually.
A robust infrastructure plan could help get the economy back on solid ground and replenish some of the jobs lost during the coronavirus pandemic.
The strong, consistent demand for infrastructure has delivered stable, repeatable cash flows to investors. Meanwhile, population growth, aging infrastructure, and constrained government budgets are creating opportunities for the private sector. The high cost of entering the infrastructure business also limits competition or provides a wide economic moat for those already in the field.
NFRA is up 16.32% over the past six months and yields 2.34%.
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