The Infrastructure ETF Hype?

June 08, 2012

 

In place of the extra U.S. exposure is additional exposure to Europe, something that has contributed to IGF’s inferior performance in the past year.

Global Last Year

After all, with austerity plans either in place or about to happen in much of Europe, it stands to reason that less infrastructure spending is on the way.

Sure, the companies in these two ETFs are all multinational behemoths with large footprints in Asia and South America, but it still stands to reason that European economic weakness will weigh more heavily on IGF’s portfolio than GII’s.

Both of these portfolios are heavily focused on the developed world, with over 50 percent of portfolio assets by weight in Europe and the U.S. This has been a boon to investors since 2009.

Newer ETFs Targeting The Developing World

But for long-term investors looking for exposure to the emerging world, there are other choices.

The iShares S&P Emerging Markets Infrastructure fund (NYSEArca: EMIF) and the PowerShares Emerging Markets Infrastructure Portfolio (NYSEArca: PXR) both offer investors exposure to firms with the largest footprint in the emerging world.

Moreover, the two funds look very different, with EMIF heavily concentrated in China and Brazil—more than 57 percent of assets by weight—while PXR is spread much more evenly across the emerging world.

There are also three single-country infrastructure funds aimed at the emerging economies of the world.

Emerging Global Advisors has a fund for India (NYSEArca: INXX), China (NYSEArca: CHXX) and Brazil (NYSEArca: BRXX). As you can see, since the launch of INXX in 2010, the performance of all of these funds has varied dramatically.

Emerging Markets since INXX

The thing that sticks out most is the terrible performance of INXX, which is down 37 percent since inception.

The Indian market has been a bloodbath for infrastructure investors, while the Brazilian infrastructure market, as measure by BRXX, has been the best performer of the three BRIC nations. This has helped EMIF outperform PXR by more than 15 percentage points, and its 7 percent return since August 2010 is the best of the lot.

The past year, however, has been extremely unkind to all of these emerging markets infrastructure portfolios.

 

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