Opportunity In Global Infrastructure ETFs

June 22, 2017

This article is part of a regular series of thought leadership pieces from some of the more influential ETF strategists in the money management industry. Today’s article features Gary Stringer, president and chief investment officer of Memphis, Tennessee-based Stringer Asser Management.

Political leaders in the world’s two largest economies, the U.S. and China, are aggressively pushing agendas related to infrastructure spending, having recognized the need for significant infrastructure upgrades.

Here, President Trump has put forth a substantial public/private partnership framework to build out and update U.S. infrastructure. In general, plans to overhaul and modernize the electrical, waterway, highway, and airway systems enjoy popular public support. This plan could amount to an estimated $1 trillion in infrastructure spending.

 

 

On the other side of the world, Chinese President Xi Jinping is advocating for his One Belt and One Road (OBOR) initiative. OBOR is an ambitious plan to develop overland and marine transportation facilities across the Eurasian countries. In total, more than 65 nations would be affected and trillions of dollars would be spent over several years.

 

The nature of infrastructure investments makes this sector less volatile and more resistant to equity market declines, in our view.

ETF investors have several options when it comes to taking advantage of the opportunities in global infrastructure. Among them are the iShares S&P Global Infrastructure ETF (IGF), the FlexShares STOXX Global Broad Infrastructure Index Fund (NFRA) and the SPDR S&P Global Infrastructure ETF (GII).

“IGF is the oldest, largest and most liquid fund in the global infrastructure segment,” according to FactSet data. The fund, which has $1.71 billion in total assets, is 36% allocated to the U.S., 10% to Spain and 10% to Canada, in a mix that currently includes 16 countries.

Competing NFRA, with $925 million in assets, focuses on developed markets even though the fund includes emerging economies. U.S., Canada and Japan lead the fund’s country allocations.

Finally, GII tracks an index of 75 of the largest infrastructure firms globally, 15 of them being emerging market names. U.S., Spain and Canada lead portfolio country allocations, and this ETF is the smallest of the three, with only $143 million in assets.

At the time of writing, Stringer Asset Management (SAM) held NFRA among its universe of ETFs included in its suite of ETF Portfolios. SAM is a Memphis, Tennessee third-party investment manager and ETF strategist. Contact SAM at 901-800-2956 or at [email protected]. For a complete list of relevant disclosures, please click here.

 

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