The evolution of infrastructure ETFs
Infrastructure as a subset of the exchange-traded funds (ETF) market can offer Australian investors with exciting growth prospects and promising returns.
According to Billy Leung, investment strategist at Global X ETFs Australia, the infrastructure investment landscape has experienced a significant evolution.
While previously the focus remained on traditional investments including commodities, energy and fixed assets such as utilities, infrastructure has now shifted its spotlight on advanced materials, new technologies, and modern equipment required for maintenance and growth.
“This shift not only promises better growth prospects but also aligns with government policies ensuring lower leverage and potentially higher returns for investors,” Leung described.
Investors in Australia can capture this potential through the vehicle of an ETF. Currently, the key options for infrastructure ETFs are:
- Global X US Infrastructure Development ETF (PAVE)
- Vanguard Global Infrastructure Index ETF (VBLD)
- VanEck Global Infrastructure (Hedged) ETF (IFRA)
- iShares Core FTSE Global Infrastructure ETF (AUD Hedged) (GLIN)
- Magellan Infrastructure Fund (Currency Hedged) (MICH)
The recently launched PAVE ETF from Global X invests in companies involved in the production of raw materials, heavy equipment, engineering, and construction, and follows the Indxx US Infrastructure Development Index.
Commenting at the time of its launch, Global X chief executive Evan Metcalf said: “Infrastructure development, which is distinct from investing in infrastructure assets themselves, is critical for the growth and modernisation of any economy.
“Within the US, recent legislative acts are directing substantial funding towards infrastructure initiatives, signalling enormous growth potential for companies in this sector.”
Meanwhile, VBLD, IFRA, and GLIN track the FTSE Developed Core Infrastructure Index, which is globally oriented and predominantly focused on utilities. The MICH ETF, which is more actively managed, also leans heavily towards utilities on a global scale.
“Investing in US infrastructure development offers promising growth and financial stability, especially when focusing on advanced materials, cutting-edge technology, and maintenance services,” Leung added.
As the sector transforms into a more complex and innovation-driven landscape, it is important for investors to understand the drivers of change.
“Advanced materials, cutting-edge technologies, and robust regulatory support are central to modern infrastructure development. These elements enhance durability, efficiency, and sustainability, reshaping the investment landscape.”
AUTHOR
Jasmine Siljic
Recommended for you
Managed investment platform DomaCom has appointed an experienced artificial intelligence leader as its new chair, joining from the same firm as its newly appointed chief executive.
Six months on from HMC Capital’s acquisition of Payton Capital, Money Management takes a look at what the firm has achieved following the deal.
Alternative asset managers may view the retail and intermediary market as a “frontier for growth”, but figures from EY show 40 per cent say they plan to invest “nothing” to target this demographic.
VanEck has named international equity ETFs as “the clear frontrunner in 2024”, with the asset class accounting for over 40 per cent of the industry’s total net flows during the year.
