On Wednesday morning, the U.S. will have a new president . . . maybe, depending on potential vote count and lawsuit issues. And as investment pundits have been offering their three cents on how to play the election, conventional wisdom holds that infrastructure spending is one area that will benefit if either Hillary Clinton or Donald Trump wins.
Clinton’s platform calls for boosting federal infrastructure funding by $275 billion over a five-year period, fully paying for these investments through business tax reform. Of that, $250 billion would be allocated toward direct public investment and the other $25 billion to a national infrastructure bank aimed at advancing the country’s competitive advantage. According to her platform, the bank would leverage its $25 billion in funds to support as much as an additional $225 billion in direct loans, loan guarantees, and other forms of credit enhancement. In total, that could mean up to $500 billion in federally supported investment.
The Trump plan, while short on specifics, supports investments in transportation, clean water, a modern and reliable electricity grid, telecommunications, security infrastructure, and other pressing domestic infrastructure needs. In early August, he made news with a statement that he would “at least double” Clinton’s promised plan via an infrastructure fund funded by government bonds. To limit the potential impact on the federal deficit, the Trump campaign released a plan in late October focused on privatizing new infrastructure spending in the U.S.
For investors, such talk by both candidates naturally leads to the following thought: Show me the infrastructure funds where I can invest!
But it’s not that simple when it comes to exchange-traded funds. There are nine ETFs that track the infrastructure space, and all of them have some degree of a global focus. The iShares Emerging Markets Infrastructure ETF (EMIF) and PowerShares Emerging Markets Infrastructure Portfolio ETF (PXR), along with the Columbia India Infrastructure ETF (INXX), are devoid of U.S. holdings.
Foreign companies do play a role in U.S. infrastructure. For example, foreign companies own about a half-dozen major toll roads, but as of now are basically collecting tolls and maintaining the roads.
By far the largest fund within the infrastructure group is the iShares Global Infrastructure ETF (IGF), with more than $1.1 billion in assets and an expense ratio of 0.47 percent. U.S.-listed companies make up nearly 39 percent of the fund’s holdings—the largest single-nation holding by a mile. The fund is up almost 12 percent year-to-date, but has gained just under 1 percent on an annualized basis since its December 2007 inception, according to Scottrade.
IGF tracks the S&P Global Infrastructure Index, as does the SPDR S&P Global Infrastructure ETF (GII), which has assets of $87 million and an expense ratio of 0.40 percent. GII is up about 11 percent year-to-date, and has returned roughly 2.6 percent on an annualized basis since it launched in January 2007.
Both funds provide investors with sizable yields north of 3 percent.
Beyond roads and bridges, the infrastructure industry encompasses airports, ports, water facilities and pipelines, among other sub-sectors. That’s reflected in the the second largest infrastructure-related ETF, the FlexShares STOXX Global Broad Infrastructure Index Fund (NFRA), which has $662 million in assets and an expense ratio of 0.47 percent. The U.S. is the fund’s largest country allocation at 40 percent, and its three biggest sector allocations are energy utilities, wireless and rail transportation.