Is there a truly GLOBAL INFRASTRUCTURE fund?
Unfortunately No.
There is not a truly global infrastructure fund in the market currently. By fund I mean an ETF. I don’t think there is a mutual fund either.
What is infrastructure?
It means basic things such as hospitals,roads,bridges,railways,ports,clean water,electricity,sewer systems,airports,telephone services etc. So companies that can build and operate these services will be engineering companies,airport operators,utilities,telephone companies etc.
In which countries infrastructure is a hot growth industry now?
Currently the emerging countries of Brazil, China and India are building infrastructure like never before to meet the demands of an expanding economy.Since Brazil has some good infrastructure for many years now, it is not building as much as the other countries. Some say Brazil is ahead of the other BRIC countries by some 20-30 years.
On the other hand, China and India do not have quality infrastructure until now.So these two countries are investing heavily in roads, bridges, tunnels, utility systems,airports etc. Even with this current buildup of infrastructure, these two countries have a long way to go before their systems are on par with developed countries such as Germany for example.
Picture: Trans-Amazon highway in Brazil
Picture: Toll Booth in India
Picture: Roundabout in Xiamen, South China
Russia seems to be catching up with infrastructure development.Other countries where infrastructure development is needed are the developing countries like countries of Africa, South and Latin America, Asian countries etc. Developed countries have a need for the maintenance and upgrade of existing systems.
What is a global infrastructure fund?
As the name suggests, it is a fund that invests(or supposed to invest) in companies that operate in the fields mentioned.
What are the funds available now and what do they invest in?
There are two ETFs that call themselves the “global infrastructure” etfs. They are:
1.ishares S&P; Global Infrastructure Index Fund – IGF
2.State Street SPDR FTSE/Macquarie Global Infrastructure 100 ETF – GII
IGF:
This ETF was launched last December and has only 27 Million $ in assets.This is not much considering the title and the hot growth taking place in developing countries.Some 61% of the assets are in utilities and energy companies. Only about 41% is invested in industrial firms that build and operate infrastructure.
The fund has a yield of 2.02% an expense ratio of 0.48%.
And most the portfolio consist of companies from the developed markets. For eg. – US represents about 24%. Hence this fund is wrongly titled as a global infrastructure fund.
GII:
Has $74 Million in assets and has grown about 10% since inception.
The fund’s objective is stated as:
“The SPDR® FTSE/Macquarie Global Infrastructure 100 ETF, before expenses, seeks to closely match the returns and characteristics of the total return performance of the Macquarie Global Infrastructure 100 Index (ticker: MCGIGIDT) an equity index based upon the global infrastructure industry market.”
This fund SHOULD be renamed as an utility fund. Since State Street already has a utility fund, the folks there seem to have created this “infrastructure” fund to attract investors.
The fund has 89.58% in Utilities.Industrials make up less than 4%. Not sure how utility companies are supposed to build all kinds of infrastructure such as airports,ports,highways etc. The fund has an expense ratio of 0.60% and has mostly developed country companies. US alone accounts for over 36%.Brazil and China account for less than 1%.
One can only hope another fund company launches a truly global infrastructure fund some time in the future.Until then, investment in the above ETFs does not make sense for the reasons mentioned above.
For more details:
http://www.amex.com/?href=/etf/EtMain.jsp?etfsection=sites6
http://www.ishares.com/product_info/fund/holdings/IGF.htm
