On this episode of the “ETF of the Week” podcast, VettaFi’s Head of Research Todd Rosenbluth discussed the Xtrackers US Green Infrastructure Select Equity ETF (UPGR) with Chuck Jaffe of “Money Life.” The pair talked about several topics regarding the fund to give investors a deeper understanding of the ETF overall.
Chuck Jaffe: One fund on point for today. The expert to talk about it. This is the ETF of the Week. Welcome to the ETF of the Week, where we examine the trending, new, newsworthy, unique, and intriguing ETFs with the help of Todd Rosenbluth, the director of research at VettaFi. And at VettaFi.com, you will find all the tools that you need to make yourself a savvier, smarter, better investor in exchange traded funds.
Todd Rosenbluth, great to chat with you again.
Todd Rosenbluth: Great to be back with you, Chuck.
Chuck Jaffe: Your ETF of the Week is…
Todd Rosenbluth: The Xtrackers US Green Infrastructure Select Equity ETF. UPGR.
Chuck Jaffe: UPGR. Xtrackers US Green Infrastructure Select Equity fund. A mouthful there, but some words that come right into my head when I hear them: green and infrastructure. Not necessarily a combination that I always expect to be used together. So is that the hook here, Todd?
Todd Rosenbluth: That is. So, for full disclosure, I was on vacation last week in Chicago. Took an architectural boat ride tour, which was tremendous. I recommend everybody do that — down the river.
Chuck Jaffe: Me too. I’ve done it – I’ve done it many times. I totally recommend it.
Todd Rosenbluth: And what was impressive to me, besides the architecture, was the way things were described in the last decade of all of these new buildings that have been constructed with – from a green mindset. This is where the buildings construction is coming into play. So I know, and we can talk about ESG and whether it’s in vogue and not in vogue.
And it’s a political hotbed, but companies want to be in buildings that are from, a green infrastructure standpoint, positive. And so the suppliers to make these green buildings, green infrastructure oriented, are in vogue. And we think this is a long-term trend that is going to play out, regardless of the political environment. And this Xtrackers ETF is a great way of doing it.
It’s a relatively new fund. It launched in July of last year. It’s relatively small. We can talk about the performance. It’s not been strong out of the gate, but we think this theme makes a lot of sense over the next few years and we think that Xtrackers is really focused on this space. They are obviously the ETFs from DWS.
Chuck Jaffe: So let’s see if I get this right. It’s small, like 5 million-ish in assets. It’s new, unproven, and doesn’t have a great track record. Yeah, those are not necessarily endorsement points. So, let’s talk about this long-term story that you’re talking about because that would be the thing. And yes, green hints at ESG, but what I thought I heard in there was that this isn’t so much an ESG story.
This is if everybody is going to go green, you want to be where they have to go. And you have to go with infrastructure. Like those changes have to be made, right?
Todd Rosenbluth: That’s right. So the changes are happening. This is just you know, how the world is going. And buildings are being built with a green mindset. And so, you want to be part of that from the suppliers. You want to be – so what you’re going to find inside this ETF is a lot of industrial companies, waste management companies, and others – Parker Hannifin I believe is in the portfolio from a construction standpoint.
But you’re also going to find for solar, there are utility companies in addition to technology. So, you get a mixture of different companies from various sectors that are playing in towards this trend. I do want to cover one of the things you touched on. It’s relatively small, but it owns stocks that are relatively liquid, and so new shares can easily get created.
So, I don’t think investors should be mindful or concerned about the size of an ETF unless they’re planning on buying $5-$10 million on their own. And then if they do, that’s wonderful, they should contact the DWS team. But if you’re pacing your way into this ETF and looking more closely at it, you should have confidence that there’s significant liquidity in the underlying stocks for new shares to get created. That’s just the ETF ecosystem.
Chuck Jaffe: I want to push back on that for a second, not with this specific fund, right? But the reason that I always ask the question when we’re talking about tiny funds, is that even when you have a trend or a raison d’etre – reason to exist – for a fund like this, that you could say, oh, that could be here forever.
You and I both know that there is a tremendous number of ETFs that are created that the sponsor goes, “Oh, it didn’t gain any traction. I’m out.” And they’re definitely more vulnerable up until they have $50 million. And nobody really wants to invest in a fund and then have the fund say, “Oh, by the way, we’re closing our doors and you’re going to have a taxable event,” which could happen.
So, there’s no risk? I mean, I know that Xtrackers is really super committed to the ideas it brings to market, but so is everybody else that brings all these funds to market. And there are a lot of closures.
Todd Rosenbluth: Yeah, so you’re right. So, a small fund that struggles to gain traction is at greater risk of closure. And we’ve seen both record launches of ETFs, as well as a high number of closures. So, it’s something to be mindful of as you’re considering an ETF. The fact that this is a unique strategy or one of the few that’s out there tied to this overall theme, makes me feel like if you’re looking for exposure to this space, this is a great fund from Xtrackers to do so.
But yeah, you do want to be mindful that a fund can close. One thing that gives me more comfort about this fund – again, obviously Xtrackers and DWS have closed funds over time – is if you go to the firm’s website, this is featured as one of their funds. Which gives me more confidence that they are behind this thematic trend, among a couple of other products that are out there.
And I think you want to figure out again, with new products, you want to scale into them. It should be a piece of your broader equity portfolio. It should be a part of your perhaps industrials oriented – you know, you would have to want to overweight exposure to industrials, which is a double-digit percentage in the S&P 500 today.
Just tilted towards more of the companies that are tied to green infrastructure. So, small, but still a compelling fund to us at VettaFi.
Chuck Jaffe: In terms of this fund, you know, we talk about ESG, but in this case, it’s really about the mindset. In other words, if somebody said, I’m an infrastructure investor and they have a classic infrastructure sector play, whatever it might be, and there are other funds out there, this would be differentiated. Not so much because of the ESG side of it, but because of the idea that you’re investing in those companies that want to be on this forward-looking trend, as opposed to the ones who are still riding the old wave or doing things the old ways, right?
Todd Rosenbluth: Right. So, infrastructure is one of the few areas, I think, in politics that people agree. And we saw Trump for years want to get infrastructure done. It did happen for infrastructure spending. We did see it from Biden. It’s likely to continue, regardless of who is in the White House. But there are some other infrastructure ETFs that are out there that are more roads and bridges oriented.
This is focused obviously on, as the name suggests, green infrastructure, that it’s connected more towards the buildings. And so that is a little bit different. You will see this ETF from Xtrackers perform differently from some of the other industrials or infrastructure-related ETFs. And yes, I touched on earlier, it is down for the year, but we think the longer-term trend is quite positive for this ETF.
Chuck Jaffe: Todd, I want to ask one more question about ESG research that’s not so much about this fund. That is more about your position as Head of Research. Which is, you know, ESG has become a political football. And it’s all this idea of you know, is something woke, et cetera. But as I understand the research, if you’re trying to do something and you say, oh, I want to invest ESG, you’re looking at the entire universe of funds.
When you do your research, you say these are the ones that pass the ESG screens. Here are the ones that don’t. But if you wanted an anti-woke fund, and there are those, you would be using the same research. You’d just be using the other end. Now, as somebody who does research, is that pretty much the way it is? That, in other words, if I want to set up a fund and I want to look at social governance screens, et cetera okay, do it.
Here’s my research. It’s going to point me this way. But, the same research would point me to the opposite end of the spectrum, if that’s where I wanted to go. So it’s not about the research, it’s about how you use it, right?
Todd Rosenbluth: It is in how you use it. So, we’ve got a wide range of different products that are out there. Some that are ESG oriented, that are screening out companies. There are some that are screening in companies based on certain characteristics. Or if they’re being excluded, that may be an area of focus. Just to come quickly back to this ETF, this is not screening companies in or out, based on ESG characteristics.
This is – these companies are benefiting from the trend of green infrastructure. And so, they are a play on the environmental focus of corporations and buildings in particular, and a way to be able to play this in a diversified manner, getting 40-50 individual stocks.
Chuck Jaffe: And if that play sounds interesting to you, you might want to check out the Xtrackers US Green Infrastructure Select Equity Fund. It is ticker symbol UPGR, and it is the ETF for the Week from Todd Rosenbluth at Verify. Todd, great stuff. See you again next week.
Todd Rosenbluth: See you next time.
Chuck Jaffe: The ETF of the Week is a joint production of VettaFi and Money Life with Chuck Jaffe. And yeah, I’m Chuck Jaffe. Why don’t you check out my hourlong weekday podcast by going to your favorite podcast app or by searching on MoneyLifeShow.com. And if you’re searching for better information on exchange traded funds and want to make yourself a better investor, check out VettaFi.com.
They have a full suite of tools there that’s going to help you out and make it so that you are better equipped to reach your goals. They’re on Twitter or X at @Vetta_Fi and Todd Rosenbluth, their Head of Research, my guest, he’s on Twitter or X at @ToddRosenbluth. The ETF of the Week is here for you every Thursday. We’ll be back next week. And until then, happy investing.
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