ETFs

4 Benefits to Global Infrastructure Investing

Global infrastructure investing and funds like the FlexShares STOXX Global Broad Infrastructure Index Fund (NFRA) offer many benefits investors may not be aware of.

A recent FlexShares blog post revealed that getting infrastructure exposure on a global scale can afford more rewards beyond serving as a utilities play. One of those benefits is income, which is hard to come by given today's low-rate landscape.

"Many investors look to infrastructure investments as a source of income—which is particularly beneficial in today’s prolonged low interest rate environment," FlexShares said. "And like real estate, infrastructure tends to benefit from low interest rates, as they result in lower costs and debt financing."

Additionally, the talk of the town in the capital markets has been inflationary pressures. With the income component of global infrastructure, investors can stay a step ahead of inflation as prices rise.

"With inflationary expectations on the rise, investors can benefit from infrastructure’s potential to serve as an inflation hedge," said FlexShares.

Global infrastructure can also be a rebound play. Certain sub-sectors of infrastructure were impacted during the pandemic, but these same sectors now represent value plays with potential upside.

"At the onset of the pandemic, certain sectors of infrastructure—like air travel, seaports, rails, and pipelines—were hit particularly hard. As global economies reopen, these sectors could be poised to benefit most," FlexShares continued.

Sector and International Diversification

Lastly, getting global infrastructure can offer ETF investors diversification potential. Not only will a fund like NFRA offer investors uncorrelated exposure in equity markets and with interest rate dynamics, the benefits of moving abroad offers an extra layer of diversification.

"Listed infrastructure equities provide investors exposure to both equity markets and interest rates—offering the potential for the diversification benefits that come with differentiated returns," said FlexShares.

Overall, NFRA seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the STOXX® Global Broad Infrastructure Index. The index reflects the performance of a selection of companies that, in aggregate, offer broad exposure to publicly-traded developed- and emerging-market infrastructure companies, including U.S. companies, as defined by STOXX Ltd. pursuant to its index methodology.

"Investors have long looked to infrastructure stocks for their potential to diversify portfolios, generate income and respond to inflation," another FlexShares article said. "But infrastructure investments have also historically come with unique risks, including sensitivity to regulatory and political impacts, as well as natural disasters. We believe the key to managing these risks lies in broadening the scope of an infrastructure investing strategy across geographies, sectors and even revenue types."

For more news, information, and strategy, visit the Multi-Asset Channel.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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