After decades of neglect, the need to ramp up spending on infrastructure has come to the forefront, presenting an attractive investment opportunity.
The term infrastructure refers to fundamental facilities and systems that serve a city, an area, or a country. Infrastructure assets are mission-critical capital projects that move people, energy, goods, and data and earn fees for their use through contracts and concessions, according to FlexShares. Some examples of traditional infrastructure projects are bridges, tunnels, toll roads, airports, pipelines, and electric, gas, water, and sewage utilities.
“We believe infrastructure presents a long-term inflation hedge as the revenues infrastructure projects derive are heavily regulated and often tied to the Consumer Price Index (CPI),” FlexShares wrote.
Investors interested in ways to diversify and hedge portfolios may want to consider the FlexShares STOXX Global Broad Infrastructure Index Fund (NFRA ) as both a real asset and an equity holding.
NFRA seeks investment results that generally correspond to the price and yield performance (before fees and expenses) of the STOXX Global Broad Infrastructure Index. The market cap-weighted index invests in companies that derive at least 50% of their revenues from segments including energy, communications, utilities, transportation, and — in an unusual twist — government outsourcing, like hospitals, prisons, and postal services, according to VettaFi.
To maintain diversification, the index imposes certain constraints, such as limits on the overall weighting of each segment. The portfolio is dominated by North American equities, followed by Japan, Australia, and the U.K.
Top holdings include Canadian National Railway, Canadian Pacific Railway, Verizon, Enbridge, and Comcast. The fund, as of June 14, holds 176 securities — considerably more than its category peers. The fund’s holdings span all market capitalizations, however, tilting more heavily than the category average toward large-cap companies.
With $2.6 billion in assets under management, NFRA is one of the larger infrastructure funds available on the market.
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