The three-decade long bull run in the fixed-income market is coming to an end, and as yield-hungry investors are forced to adapt their portfolios to changing market conditions, some may turn to global infrastructure stocks and sector-related exchange traded funds to make up for the yields.
“After a 30-year bull run in fixed-income, more investors are dialing back bond investments and moving that money into global infrastructure,” according to Legg Mason.
According to a recent David Hale report, annual global infrastructure investments will jump to $3.8 trillion between 2014 and 2030 from $2.7 trillion in the period between 1997 and 2013. Additionally, the value of infrastructure assets will expand to $114 trillion by 2030 from $13 trillion back in the 1990’s.
To capitalize on this potential growth opportunity, investors have a several exchange traded funds options investors to tap the infrastructure investing theme, including the Legg Mason Global Infrastructure ETF (NASDAQ: INFR). The infrastructure ETF shows a 2.94% 12-month yield.
INFR tracks the performance of the RARE Global Infrastructure Index, which is comprised of global infrastructure-related equities. The underlying index will also screen for other factors, including a liquidity filter for companies with a minimum of $500 million market capitalization and a 1-year average daily value traded of $2 million, along with those ranked from the highest dividend yield and cash flow yield. Components are then weighted by market capitalization and free float, RARE exposure score, price volatility and region.
“The universe of securities used for INFR is inspired by RARE’s active strategies, and the firm tries to invest as close as possible to the actual assets – so investing in a road versus a construction company building the road,” according to Legg Mason.
The ETF can include utilities infrastructure sectors, including electric utilities, gas utilities, independent power producers & energy traders, multi-utilities, renewable electricity and water utilities. Additionally, the fund may hold economically sensitive infrastructure sectors, including airport services, cable & satellite, highways & rail tracks, marine ports & services, oil & gas storage & transportation, railroads, and specialized real estate investment trusts.
INFR Expense Ratio Lowered
Potential investors will also find the option cheaper to trade in the future as Legg Mason is lowering the expense ratio on INFR from 53 bps to 45 bps. The firm also added a contractual fee waiver to further reduce the fund’s fees from 45 to 40 bps until February 29, 2020. This makes INFR tied for lowest cost ETF in the global infrastructure space.
For more information on the infrastructure sector, visit our infrastructure category.