Infrastructure promises to be a key focus for the Trump administration in 2018 and it is also growing internationally. Industry experts expect the Trump administration to unveil a $1 trillion infrastructure package shortly as it moves to the forefront on the political agenda. Meanwhile, the United States, France, United Kingdom and Germany all have plans for expansion of infrastructure spending. In addition to the developed countries, emerging markets have also seen significant investment in the sector.
The top infrastructure ETFs globally have been steadily paying handsome dividends and saw impressive 2017 returns. There is a lot of stability in companies that build infrastructure because their contracts tend to be for extended terms. Revenues are steady and future earnings are predictable. (See also: Top 4 Long-Term Infrastructure Stocks as of December 2017.)
In 2018, similar to many other sectors, technology and technology disruption will be a factor. Therefore, many predictions for plans and top companies in the sector will be highly influenced by technological factors such as changes in electricity generation, transportation modes and communication methods. Winners in the infrastructure category are likely to have an edge in technology and new innovations.
As a result, the infrastructure sector is expected to grow broadly on numerous regional fronts with increasingly established companies also offering higher dividends to entice investors. Below are four of the top infrastructure ETFs with return momentum expected to carry over into the first half of 2018. Funds were chosen based on category performance. All figures are current as of January 24, 2018.
1. Columbia India Infrastructure ETF (INXX)
- Total Assets: $58.67 million
- 2017 YTD Return: 51.21%
- 2018 YTD Return: 0.06%
- Average Volume: 4,284
- Dividend Yield: 0.63%
- Expense Ratio: 0.98%
- Price: $15.88
This ETF focuses on infrastructure in India, which is one of the more advanced emerging market countries also associated with BRIC investments. The country has a Reserve Bank lending repo rate of 6% and an inflation rate of 3.36% with some concerns about inflation going forward. While the economy is volatile, the International Monetary Fund is forecasting a 7.4% 2017 growth rate for India, with subsequent years seeing similar levels of growth. That compares to an expected 6.8% growth rate for China, meaning India is expected to be the fastest growing economy among emerging nations, following last year’s slower pace.
A fairly healthy economic environment in India supported infrastructure returns in 2017. Investors can expect to see further gains in 2018 as economic activity improves and an evolving banking sector offers greater opportunity for bank lending.
The market’s advancements bode well for INXX. The ETF models its investments to achieve results similar to the Indxx India Infrastructure Index. The Index has 30 stocks and weights them based on market capitalization, so the ETF tends to deploy assets in the same way. Top holdings in the Fund include: Gail India, Tata Steel and Adani Ports & Special Economic Zone.
2. First Trust NASDAQ Clean Edge Smart Grid Infrastructure Index Fund (GRID)
- Total Assets: $33.11 million
- 2017 YTD Return: 27.43%
- 2018 YTD Return: 4.33%
- Average Volume: 6,277
- Dividend Yield: 1.07%
- Expense Ratio: 0.70%
- Price: $53.20
This ETF from First Trust offers investors a portfolio of environmentally conscious infrastructure companies, highly integrated in infrastructure development and operations globally. The Fund seeks to track the holdings and return of the NASDAQ OMX Clean Edge Smart Grid Infrastructure Index. This index starts with a base of companies that are involved with smart grid, electric infrastructure and other grid-related activities as defined by cleantech company Clean Edge. Companies more comprehensively known as pure play infrastructure providers are given a higher weight in the Index while diversified companies receive a lower weight.
The Fund was launched in November 2009. It has a five-year annualized total return of 13.21%.
3. PowerShares Emerging Markets Infrastructure ETF (PXR)
- Total Assets: $20.39 million
- 2017 YTD Return: 25.41%
- 2018 YTD Return: 8.06%
- Average Volume: 1,874
- Dividend Yield: 3.52%
- Expense Ratio: 0.75%
- Price: $40.08
This ETF offers an investment fund that invests in infrastructure companies from the emerging market countries. China represents the greatest portion of the Fund at 28% followed by Taiwan at 11% and Brazil at 8%. Across sub-sectors, basic materials represents a significant portion at 46.7%.
PXR uses an index approach and seeks to replicate the holdings and return of the S-Network Emerging Infrastructure Builders Index. This index broadly includes emerging market companies with over 50% of revenue derived from infrastructure business activities.
Launched in October 2008, the fund has a three-year annualized total return of 3.33% and a five-year annualized total return of -1.04%.
4. The iShares Global Infrastructure ETF (IGF)
- Total Assets: $2.31 billion
- 2017 YTD Return: 19.34%
- 2018 YTD Return: 2.17%
- Average Volume: 324,814
- Dividend Yield: 2.95%
- Expense Ratio: 0.48%
- Price: $46.20
IGF uses the S&P Global Infrastructure Index as its benchmark. This Index invests in companies across the globe, including transportation, utilities and energy companies. You will find companies that are involved in airports, supporting service rail companies, managers and owners of marine ports, and oil and gas storage companies in the portfolio. The focus is on large infrastructure companies in developed markets.
The Fund was launched in December 2007. It has three-year, five-year and ten-year total annualized returns of 5.47%, 8.16% and 2.39% respectively.