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Inside Guggenheim's New High Income Infrastructure ETF - ETF News And Commentary

Zacks Equity Research

The income ETF space remains a favorite among investors as evidenced by the incredible level of interest seen in many of the products in the space. In fact, many issuers have lined up with several new funds focused on income strategies to tap into this sentiment (read: 3 ETFs Yielding Over 6% to Watch as Market Speculates Rising Rates).

This trend continues with Guggenheim which has just launched a fund with global coverage, focusing on the high income space, but with a slight tilt as the fund has a specific sector exposure i.e. infrastructure. In fact, the global footprint made the fund more attractive given the ultra-low interest rate backdrop prevailing in most developed economies.

Below, we have highlighted the newly launched fund – Guggenheim S&P High Income Infrastructure ETF (GHII) – in greater detail.

GHII in Focus

This product tracks the S&P High Income Infrastructure Index, focusing on 50 high-yielding global infrastructure companies. These companies are engaged in several infrastructure-related sub-industries, such as energy, transportation and utilities.

The individual stocks are moderately diversified as no single security forms more than 5.09% of the total fund assets. Sydney Airport (5.09%), Williams Companies, Inc. (4.99%) and Jiangsu Express Co Ltd-H (4.79%) are the top three holdings of the fund.

As far as geographic allocation is concerned, the U.S. takes the top spot with about one-fifth of the basket followed by Australia (14.45%) and China (9.37%).  Overall, the fund is spread across 15 countries. Utilities holds the lion’s share followed by Industrials (33.15%) and Energy (16.70%). The fund charges 45 bps in fee.

How Could it Fit in a Portfolio?

The ETF could be well suited for income-oriented investors seeking higher longer-term returns with low risk. Utilities and infrastructure related stocks are interest-rate sensitive and recession-resistant in nature. With interest rates being low in most developed nations, the appeal of utilities stocks has increased as these offer steady and strong yields (read: 3 Utility ETFs Surging to Start 2015).

However, investors looking for a high-growth vehicle may not be satisfied with this product as infrastructure is generally a slow-growth business.


The main competitor of GHII is the established iShares S&P Global Infrastructure Index Fund (IGF). This product also focuses in on global utilities ranging from transportation to electricity services, and it has already seen a great deal of interest from investors, as evidenced by its $1.18 billion in assets under management.

This iShares fund charges 47 bps in fee. The U.S. takes about 32.8% of the basket followed by Canada (8.33%) and Australia (8.17%). The fund holds 75 stocks in total. The fund yields yielded about 2.98% as of February 19, 2015.

The newly launched ETF will also face stiff competition from iShares S&P Global Utilities Index Fund (JXI) which has amassed about $338.3 million in assets. The fund charges 48 bps in fees and yields about 3.67% annually (as of February 19, 2015) (read: FlexShares Launches Global Infrastructure ETF).

Another potentially sound player in the space is SPDR FTSE/Macquarie Global Infrastructure 100 ETF (GII) though the fund has behind the newly launched GHII in terms of assets within such a short span. Notably, within just seven days of launch, GHII has amassed about $189 million in assets while GII has garnered $112 million in AUM.

So, though competition may be intensifying in the global infrastructure ETF world, GHII is definitely worth a closer look. The product charges reasonably in the space and has an attractive yield, which is drawing investors’ attention. We expect its wining trend to continue in the days to come (read: ProShares Rolls Out New Global Infrastructure ETF).

Also, most other global infrastructure ETFs have put a large weight on the U.S. unlike GHII. A lower focus on the U.S. market might earn GHII an extra advantage over its peers as the U.S. economy will likely see a rise in rates.

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GUGG-SP HI INFR (GHII): ETF Research Reports
ISHARS-GL IN (IGF): ETF Research Reports
ISHARS-GL UT (JXI): ETF Research Reports
SPDR-F/M GI100 (GII): ETF Research Reports
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