Some market observers believe we’re on the cusp of an infrastructure supercycle that would prop up infrastructure assets like 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 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.
“A significant infrastructure bill would catapult demand for key building materials, such as cement, as any future proposals are expected to prioritize repairs to existing roads and bridges before turning to new, more innovative projects,” reports Thomas Franck for CNBC.
Investors should consider infrastructure sector-specific exchange traded funds after President Joe Biden 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.
NFRA: The Way to Go to Play Impending Infrastructure
“US infrastructure investment has run US $1.25 trillion below trend over the past decade. An infrastructure deal could set the stage for a Super Cycle, especially in cement, with beneficiaries re-rating,” according to Morgan Stanley.
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.
A variety of points highlight NFRA’s near-term utility.
Morgan Stanley “figures about $400 billion is needed for concrete bridges, $800 billion for concrete roads, $300 billion for steel bridges and $1.6 trillion to ‘take asphalt roads from poor to good condition’,” reports CNBC. “Federal infrastructure spending would benefit a long list of companies, but the Morgan Stanley team believes a handful of materials stocks could see some of the largest upside.”
For more on multi-asset strategies, visit our Multi-Asset Channel.
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.