Other Options
“When people think of infrastructure, they intuitively think of highways, bridges and railroads,” says Robert Goldsborough, an analyst for passive strategies on Morningstar Inc.’s manager research team. “It’s the real-world version of SimCity.”
At Morningstar, Goldsborough covers the largest exchange-traded fund focusing on infrastructure, the iShares Global Infrastructure ETF (IGF), and also keeps his finger on the pulse of other funds in the category. “We’re in the fairly early innings right now” when it comes to the development of new infrastructure investment vehicles, he says.
As of June 30, the iShares ETF held 76 companies. Its largest exposure is to utilities and industrials, particularly transportation. “I think the fund makes sense,” Goldsborough says. “It’s diverse, its volatility is very manageable and its fees are reasonable.”
There are also smaller ETFs to choose from, including the SPDR S&P Global Infrastructure ETF (GII) and the FlexShares STOXX Global Broad Infrastructure ETF (NFRA). Investors can also look at municipal bond funds that include issues for roads, bridges, municipal power plants, tunnels, water and sewers, he says.
Goldsborough expects to see strong demand for infrastructure in the long term. “Emerging market spending is not going to go away,” he says, noting that the emerging middle class needs places to live and transportation to get to work.
He is keeping an eye on regulatory issues but doesn’t see anything of imminent concern. Debt is cheap now, which helps, but rising interest rates could constrain infrastructure spending, he says.
Guy Scott, a co-portfolio manager of the Janus International Equity Fund (JAITX), is also closely watching the global infrastructure playing field.
Denmark-based A.P. Moller-Maersk A/S, the world’s leading port operator and container-shipping company, was the fund’s largest position as of June 30. Its economies of scale make it very well positioned for the expansion of global trade, Scott says.
The fund is also invested in what he calls “drivers of infrastructure,” including Volkswagen AG, the largest foreign automaker in China by market share, and luggage maker Samsonite International SA, a beneficiary of increasing travel among China’s growing middle class.
Global Growth Spurt
October 1, 2014
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