Investing in Infrastructure ETFs

LOW COST FUNDS: Investing in infrastructure can provide you with portfolio diversification as well as an inflation-linked source of income. We highlight two ETFs for your consideration

Kenneth Lamont 14 December, 2016 | 10:47AM
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This article is part of Morningstar's Guide to Alternative Investing; providing everything you need to know about property, commodities, infrastructure and other diversifying assets. 

 

 

 

 

Kenneth Lamont: Investors have traditionally invested in infrastructure as an asset class attracted by its propensity to produce stable strong cash flows through time and for its potential as a diversifier within a portfolio.

In the U.K. and specifically on the LSE an investor in ETFs or passives has several options. The most popular fund currently is the iShares Global Infrastructure Fund. This fund invests in the asset class by investing in infrastructure equity, so the equity firms that invest in infrastructure. While this approach is pleasing in its simplicity, there may be some drawbacks for those looking for diversification. For example, over the last five years this fund has had a particularly high correlation with the MSCI World. In terms of dividends, this fund has produced strong, stable returns over a similar period.

Alternatively, investors may consider the SPDR Morningstar Multi-Asset Global Infrastructure Fund. This fund differs from the iShares fund in that it not only invests in the equity and infrastructure funds but also their debt which maybe the debt of Veolia or Transport for London. Although, being a relatively new player in the market we have yet to see its performance in terms of diversification and ability to produce stable income over time.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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About Author

Kenneth Lamont  is a passive funds research analyst for Morningstar Europe.