FlexShares Launches Infrastructure ETF

October 09, 2013

Northern Trust’s ETF unit offers its way for investors to tap into infrastructure.

Northern Trust’s FlexShares ETF unit launched a global equity infrastructure fund designed to capture growth in developed as well as emerging markets at a time of heightened investor interest in infrastructure given growth in the emerging markets and modernization in some developing countries.

The FlexShares Stoxx Global Broad Infrastructure Index Fund will track the Stoxx Global Broad Infrastructure Index, which comprises infrastructure-related companies domiciled in developed and emerging markets (including the United States), according to the fund’s prospectus.

The fund will be listed on NYSE Arca under the symbol “NFRA,” and will have an expense ratio of 0.47 percent, or $47 for every $10,000 invested. NFRA has some similarities with Northern Trust’s most successful fund to date, the $2.6 billion FlexShares Morningstar Global Upstream Natural Resources Fund (GUNR | B-83). GUNR was launched in September 2011.

Infrastructure and natural resources have proven to be popular in investment markets in recent years, largely because of rapid development in emerging markets such as China, Brazil and India. Additionally, many developed countries, notably the United States, have pressing need to update old infrastructure, which is likely to keep firms in the sector quite busy for a long time.

The companies included in the new fund’s index derive at least half of their revenues from the ownership, development, construction, financing or operation of infrastructure assets, including cable and satellite, data centers, wireless towers, energy utilities, correctional facilities, hospitals and postal services, as well as rail transportation.

As of Sept. 19, the top five countries in the index were the United States at 38 percent, Japan at 11.6 percent, the United Kingdom at 10.6 percent, Canada at 10.4 percent and Germany at 6.1 percent.

The fund’s exposure to Japan is notable because of Tokyo’s winning bid to host the 2020 Olympics, which will translate into 2.96 trillion yen ($30 billion) and 150,000 jobs for the world’s third-largest economy, according to an estimate from the Tokyo bid committee last year.

The biggest of the competing funds is the iShares Global Infrastructure fund (IGF | A-64), which has $595.9 million in assets under management, followed by the $52.6 million SPDR S&P Global Infrastructure ETF (GII). Both track the same benchmark, the S&P Global Infrastructure Index.

 

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