Designed to provide broad exposure to the Utilities/Infrastructure ETFs category of the market, the iShares U.S. Infrastructure ETF (IFRA) is a smart beta exchange traded fund launched on 04/03/2018.
What Are Smart Beta ETFs?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.
By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.
While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.
Fund Sponsor & Index
Because the fund has amassed over $2.57 billion, this makes it one of the larger ETFs in the Utilities/Infrastructure ETFs. IFRA is managed by Blackrock. IFRA seeks to match the performance of the NYSE FACTSET U.S. INFRASTRUCTURE INDEX before fees and expenses.
The NYSE FactSet U.S. Infrastructure Index comprises of equities of U.S. companies that have infrastructure exposure and that could benefit from a potential increase in domestic infrastructure activities.
Cost & Other Expenses
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.
Operating expenses on an annual basis are 0.30% for IFRA, making it one of the least expensive products in the space.
The fund has a 12-month trailing dividend yield of 1.74%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
Representing 42.40% of the portfolio, the fund has heaviest allocation to the Utilities sector; Industrials and Materials round out the top three.
Looking at individual holdings, Vistra Corp- (VST) accounts for about 1.08% of total assets, followed by Nextera Energy Inc- (NEE) and Nrg Energy Inc- (NRG).
Its top 10 holdings account for approximately 8.87% of IFRA's total assets under management.
Performance and Risk
The ETF return is roughly 13.31% and is up about 14.65% so far this year and in the past one year (as of 07/24/2024), respectively. IFRA has traded between $34.58 and $45.30 during this last 52-week period.
The ETF has a beta of 1.02 and standard deviation of 18.27% for the trailing three-year period. With about 168 holdings, it effectively diversifies company-specific risk.
Alternatives
IShares U.S. Infrastructure ETF is a reasonable option for investors seeking to outperform the Utilities/Infrastructure ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
IShares Global Infrastructure ETF (IGF) tracks S&P Global Infrastructure Index and the Global X U.S. Infrastructure Development ETF (PAVE) tracks INDXX U.S. Infrastructure Development Index. IShares Global Infrastructure ETF has $3.67 billion in assets, Global X U.S. Infrastructure Development ETF has $7.87 billion. IGF has an expense ratio of 0.41% and PAVE charges 0.47%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Utilities/Infrastructure ETFs.
Bottom Line
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.
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Get it free >>iShares U.S. Infrastructure ETF (IFRA): ETF Research Reports
NextEra Energy, Inc. (NEE) : Free Stock Analysis Report
NRG Energy, Inc. (NRG) : Free Stock Analysis Report
iShares Global Infrastructure ETF (IGF): ETF Research Reports
Vistra Corp. (VST) : Free Stock Analysis Report
Global X U.S. Infrastructure Development ETF (PAVE): ETF Research Reports
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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.
