10 Best Infrastructure ETFs
In this article, we discuss 10 best infrastructure ETFs. If you wish to skip our discussion on the infrastructure industry, head directly to 5 Best Infrastructure ETFs.
As noted by Deloitte, significant changes in the economy, along with the transition to remote work and telemedicine, are causing noteworthy effects on infrastructure. Traditional physical infrastructure such as roads, bridges, and power systems is undergoing a transformation, becoming increasingly digital. This shift places an emphasis on technologies like broadband, self-driving vehicles, and intelligent infrastructure. Additionally, there is a growing emphasis on environmental considerations and broader societal advantages that are influencing the infrastructure sector's evolution. Deloitte's report highlights key findings regarding how governments worldwide are shifting their infrastructure investments to adapt to changing trends. Notably, respondents believe that technologies like artificial intelligence, cloud computing, and cybersecurity will exert the most significant influence on infrastructure projects. AI and machine learning, in particular, are expected to have a substantial impact, with 55% of those surveyed expressing this view. As governments transition towards more digitally-oriented infrastructure, there is a growing concern about cyber risks. A significant majority, 76% of respondents, expect a heightened focus on data security over the next few years. Moreover, there is a noticeable demand for green infrastructure, with 60% of those surveyed expressing intentions to invest in urban spaces designed for walking, cycling, socializing, and dining.
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PwC highlighted that the infrastructure sector faced significant changes globally, driven by factors like the availability of funds, evolving social and environmental concerns, and rapid urbanization. COVID-19 introduced new challenges and its full impact will take time to unfold. In the short term, it will reshape the industry in four ways – increasing focus on operational resilience, affordability, the adoption of new technologies, and sustainability. Successful infrastructure projects require collaboration among various stakeholders, each with their own interests and agendas.
In 2022, the infrastructure sector remained resilient, even in the face of market challenges, according to UBS. Ongoing trends like digitalization and decarbonization will continue to drive the need for new investments. However, the overall economic conditions have significantly deteriorated. Investors can no longer rely on cheap credit to boost their investment returns. Moving forward, they must adopt a more strategic approach to investment and asset management to achieve positive outcomes. Inflation has drawn considerable attention to private infrastructure investments. This asset class has gained a reputation for its ability to stand strong in inflationary situations, mainly because it can adjust prices effectively and pass on higher costs to customers. Its defensive characteristics make it particularly appealing when times are uncertain, serving as a safe haven for investors. Performance data from 2005 to 2021 shows that private infrastructure investments performed better than public ones, especially when inflation was higher than usual. This performance difference became even more obvious when inflation was high and economic growth was slow. It is likely for the trend to continue through 2023, given that private markets had already outperformed public markets in the first half of the year.
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Similarly, J.P. Morgan's insights underline the strength and versatility of core private infrastructure investments. They seem to perform well regardless of economic cycles, highlighting the importance of diversifying investment portfolios. Similar trends are expected to continue throughout 2023. Katarina Roele, PhD, stated:
“Significant attractive investment opportunities in core private infrastructure remain due to the structural tailwinds of the need to modernize, replace and decarbonize existing assets.”
The global economy is grappling with challenges such as a recession, monetary tightening, rising living costs, and disruptions in various markets. Inflation is anticipated to remain high throughout the year, and this, along with labor shortages and pricing pressures, might pose challenges for plans involving significant construction and growth strategies. The global economic outlook suggests that we can expect slower, and in some cases, even stagnant growth in the near future. Many countries are heading towards recessions at a rapid pace. In this scenario, assets that do not generate much immediate cash flow and rely heavily on long-term growth or high exit values may face challenges. On the other hand, assets with a significant portion of their revenue coming from contracted or regulated sources, along with terms linked to inflation, are likely to fare better in this tough economic climate.
In this article, we discuss some of the best infrastructure ETFs, which offer investors exposure to companies like Canadian National Railway Company (NYSE:CNI), Westinghouse Air Brake Technologies Corporation (NYSE:WAB), and Parker-Hannifin Corporation (NYSE:PH).
Our Methodology
We used an ETF screener and filtered out the best infrastructure ETFs based on their 5-year performance. We have also discussed the top holdings of the ETFs to offer better insight to potential investors. These ETFs have accumulated significant gains in the past 5 years. The list is ranked in ascending order of the 5-year performance of these infrastructure ETFs as of September 25, 2023.
Photo by Denys Nevozhai on Unsplash
Best Infrastructure ETFs
10. ProShares DJ Brookfield Global Infrastructure ETF (NYSE:TOLZ)
5-Year Performance as of September 25: 2.41%
ProShares DJ Brookfield Global Infrastructure ETF (NYSE:TOLZ) aims to achieve investment results that closely follow the performance of the Dow Jones Brookfield Global Infrastructure Composite Index. This ETF was introduced on March 25, 2014, and as of June 30, 2023, it has a portfolio consisting of 110 stocks. It offers an expense ratio of 0.46%.
American Tower Corporation (NYSE:AMT) is one of the top holdings of the ProShares DJ Brookfield Global Infrastructure ETF (NYSE:TOLZ). American Tower Corporation (NYSE:AMT), a prominent global real estate investment trust, stands as a major independent holder, manager, and builder of properties for multiple communication purposes.
According to Insider Monkey’s second quarter database, 60 hedge funds were bullish on American Tower Corporation (NYSE:AMT), in contrast to the last quarter when 65 funds had invested in the stock. Charles Akre’s Akre Capital Management is the largest stakeholder of the company, with a position consisting of 6.74 million shares worth $1.31 billion.
Like Canadian National Railway Company (NYSE:CNI), Westinghouse Air Brake Technologies Corporation (NYSE:WAB), and Parker-Hannifin Corporation (NYSE:PH), American Tower Corporation (NYSE:AMT) is one of the top infrastructure stocks to watch.
Akre Focus Fund made the following comment about American Tower Corporation (NYSE:AMT) in its second quarter 2023 investor letter:
“The Fund owns many businesses that stand to benefit enormously from A.I. The compute power demanded by A.I. is growing exponentially and will continue to fuel demand for the wireless and data center infrastructure provided by American Tower Corporation (NYSE:AMT). The two negative detractors from performance this quarter were American Tower and Danaher.”
9. SPDR S&P Kensho Intelligent Structures ETF (NYSE:SIMS)
5-Year Performance as of September 25: 3.99%
The SPDR S&P Kensho Intelligent Structures ETF (NYSE:SIMS) seeks to achieve investment results that track the total return performance of the S&P Kensho Intelligent Infrastructure Index. This index is designed to include companies that are at the forefront of innovation in the intelligent infrastructure sector. The fund was first introduced on December 26, 2017. By September 22, 2023, the fund's assets under management amounted to $20.86 million, and its portfolio included 48 stocks. The expense ratio for this fund is 0.45%. SPDR S&P Kensho Intelligent Structures ETF (NYSE:SIMS) is one of the best infrastructure ETFs.
Carrier Global Corporation (NYSE:CARR) is one of the largest holdings of the SPDR S&P Kensho Intelligent Structures ETF (NYSE:SIMS). Carrier Global Corporation (NYSE:CARR) is a global company that specializes in technologies related to heating, ventilation, air conditioning, refrigeration, fire safety, security, and building automation. The company is divided into three segments – HVAC, Refrigeration, and Fire & Security.
According to Insider Monkey’s second quarter database, 34 hedge funds were bullish on Carrier Global Corporation (NYSE:CARR), in contrast to the last quarter when 41 funds had invested in the stock. Ric Dillon’s Diamond Hill Capital is the largest stakeholder of the company, with 4.35 million shares valued at $216.22 million.
Here is what Davis Opportunity Fund has to say about Carrier Global Corporation in its Q3 2021 investor letter:
“In the industrial space, we own a select list of well-entrenched market leaders, such as Carrier Global, a global leader in heating, ventilation and air conditioning (HVAC) solutions.. These have recovered this year from their lulls in 2020, yet continue to trade at reasonable multiples of subdued earnings, creating a potential setup for the double play of recovering multiples on recovering earnings.”
8. SPDR S&P Global Infrastructure ETF (NYSE:GII)
5-Year Performance as of September 25: 5.23%
The SPDR S&P Global Infrastructure ETF (NYSE:GII) seeks to deliver investment results that align with the overall performance of the S&P Global Infrastructure Index. The ETF aims to offer exposure to the 75 largest infrastructure-related stocks, selected based on their float-adjusted market capitalization and liquidity. Launched on January 25, 2007, the fund has assets under management totaling $434.68 million as of September 22, 2023, with a portfolio of 75 stocks. Its expense ratio stands at 0.40%. SPDR S&P Global Infrastructure ETF (NYSE:GII) is one of the top infrastructure ETFs to monitor.
NextEra Energy, Inc. (NYSE:NEE) is one of the biggest holdings of the SPDR S&P Global Infrastructure ETF (NYSE:GII). NextEra Energy, Inc. (NYSE:NEE) is engaged in the generation, transmission, distribution, and sale of electric power to retail and wholesale customers in North America. Their electricity is produced using wind, solar, nuclear, coal, and natural gas facilities. NextEra also has a significant presence in the development, construction, and operation of long-term contracted assets, focusing on clean energy solutions.
According to Insider Monkey’s second quarter database, 59 hedge funds were bullish on NextEra Energy, Inc. (NYSE:NEE), same as the preceding quarter. John Overdeck and David Siegel’s Two Sigma Advisors held a significant position in the company, with approximately 2.57 million shares worth $190.42 million.
ClearBridge Investments made the following comment about NextEra Energy, Inc. (NYSE:NEE) in its Q3 2022 investor letter:
“NextEra Energy, Inc. (NYSE:NEE) is an integrated utility business with a regulated utility operating in Florida and the largest wind business in the U.S. NextEra’s regulated business includes Florida Power & Light, which serves nine million people in Florida. NextEra’s share price rose along with the passage of the U.S. Inflation Reduction Act, which considerably expands support for renewable energy.”
7. iShares Global Infrastructure ETF (NASDAQ:IGF)
5-Year Performance as of September 25: 6.22%
The iShares Global Infrastructure ETF (NASDAQ:IGF), ranking 7th on our list of the best infrastructure ETFs, aims to replicate the performance of the S&P Global Infrastructure Index, which comprises equities from developed markets in the infrastructure sector. This ETF provides investors with exposure to companies involved in transportation, communication, water, and electricity services, offering a targeted way to invest in infrastructure stocks worldwide. It was launched on December 10, 2007. The ETF's portfolio consisted of 75 stocks and its net assets, as of September 25, 2023, came in at $3.7 billion. The expense ratio is 0.41%.
The Southern Company (NYSE:SO) is one of the largest holdings of the iShares Global Infrastructure ETF (NASDAQ:IGF). The Southern Company (NYSE:SO) is involved in producing, transmitting, and distributing electricity. The company operates through three segments – Gas Distribution Operations, Gas Pipeline Investments, and Gas Marketing Services.
According to Insider Monkey’s second quarter database, 32 hedge funds were bullish on The Southern Company (NYSE:SO). This number increased from the last quarter when 25 funds had invested in the stock. Steve Cohen’s Point72 Asset Management is the leading position holder in the company, with 2.26 million shares valued at $158.81 million.
In addition to Canadian National Railway Company (NYSE:CNI), Westinghouse Air Brake Technologies Corporation (NYSE:WAB), and Parker-Hannifin Corporation (NYSE:PH), The Southern Company (NYSE:SO) is one of the best infrastructure stocks to consider.
6. FlexShares STOXX Global Broad Infrastructure Index Fund (NYSE:NFRA)
5-Year Performance as of September 25: 6.71%
The FlexShares STOXX Global Broad Infrastructure Index Fund (NYSE:NFRA) is one of the best infrastructure ETFs to watch. It seeks to achieve results that align with the price and yield performance of the STOXX Global Broad Infrastructure Index. The fund was introduced on October 8, 2013. As of September 25, 2023, the fund holds net assets worth $2.13 billion and maintains a net expense ratio of 0.47%. Its portfolio consists of 212 stocks.
Canadian National Railway Company (NYSE:CNI) is one of the top holdings of the FlexShares STOXX Global Broad Infrastructure Index Fund (NYSE:NFRA). Canadian National Railway Company (NYSE:CNI), along with its subsidiary companies, is involved in rail and associated transportation activities. It also offers trucking services. Additionally, Canadian National Railway Company (NYSE:CNI) caters to industries including automotive, coal, fertilizers, temperature-sensitive cargo, forest products, oversized shipments, grain, metal and minerals, petroleum and chemicals, as well as consumer goods. The company manages a network of trains in Canada and the United States.
According to Insider Monkey’s second quarter database, 38 hedge funds were bullish on Canadian National Railway Company (NYSE:CNI), compared to 39 funds in the previous quarter. Bill & Melinda Gates Foundation Trust held the largest position in the company, with 54.83 million shares worth $6.64 billion.
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Disclosure: None. 10 Best Infrastructure ETFs is originally published on Insider Monkey.
