A bipartisan infrastructure bill seems to finally be moving forward in the U.S. Senate, with early estimates in the ballpark of $1 trillion.
This infrastructure spending isn’t just for the usual suspects like roads and bridges — as it includes digital initiatives and there are even some Democrats pushing for so-called “human infrastructure” allocations for things like health care.
That said, you can never tell precisely where things will wind up in Washington.
Even when some cash is earmarked for certain sectors, it can be difficult to predict the individual companies that will benefit. However, with these infrastructure exchange-traded funds, investors can cast a wide net to potentially benefit from this broader trend in spending without worrying too much about the details.
— Global X US Infrastructure Development ETF (ticker: PAVE)
— iShares Global Infrastructure ETF (IGF)
— FlexShares STOXX Global Broad Infrastructure Index Fund (NFRA)
— iShares U.S. Infrastructure ETF (IFRA)
— SPDR S&P Global Infrastructure ETF (GII)
Global X U.S. Infrastructure Development ETF (PAVE)
A purely domestic infrastructure ETF, this Global X fund is the largest of the bunch with roughly $3.8 billion in assets under management.
PAVE includes a host of U.S. stocks that would benefit from potential infrastructure investment, ranging from steelmaker Nucor Corp. ( NUE) to railroad company Kansas City Southern ( KSU) to machinery manufacturer Deere & Co. ( DE).
There’s obviously a wide array of individual stocks that make up this fund’s roughly 100 holdings, but considering the uncertainty at the early stages of infrastructure negotiations, that may be a plus. This infrastructure ETF is up about 72% in the last 12 months to double the performance of the S&P 500 over the same period, so momentum is on PAVE’s side.
iShares Global Infrastructure ETF (IGF)
Another large infrastructure fund on Wall Street, IGF also boasts more than $3 billion in assets.
This is obviously not solely a U.S.-focused fund, as the name implies. Seeing as it’s comprised of more than 70 of the largest infrastructure players on the planet, this may not necessarily preclude IGF from participating in a U.S.-led spending spree.
Consider top position Transurban (TCL), an Australia based toll road operator that also happens to be the company in charge of the Washington, D.C., “beltway” and related commuter lanes in Maryland and Virginia. Or consider Canada-based Enbridge ( ENB) that operates gas pipelines across North America, including key U.S. markets.
If anything, this global approach may allow for a broader and more diversified way to play any domestic infrastructure spending.
FlexShares STOXX Global Broad Infrastructure Index Fund (NFRA)
Smaller than the prior two leaders in both dollars as well as name recognition, this infrastructure ETF from smaller shop FlexShares is still a major infrastructure ETF with about $2.8 billion in assets at present.
Like the prior iShares fund, it’s a broad and internationally focused offering. The fund also has double the components of the prior funds with a roster of 270 or so holdings at present, and a wider definition of “infrastructure” to include telecom plays Comcast Corp. ( CMCSA) and Verizon Communications ( VZ) near the top of its list.
Bridging the “digital divide” and bringing high speed internet to underserved areas is a key part of the Democrats’ infrastructure agenda, so this fund could be a good way to look beyond typical industrial plays if you want to play this trend.
iShares U.S. Infrastructure ETF (IFRA)
After the three prior infrastructure ETFs with billions in assets, the dedicated funds focused on infrastructure start to get significantly smaller. IFRA, while offered from investment giant IShares and theoretically a more attractive play for some investors given its domestic focus, only boasts about $600 million in assets under management at present.
It does include a pretty diversified list of holdings, however, with more than 150 positions and no single stock representing more than about 1% of the total portfolio.
And while it’s not the top performer on this list, IFRA’s year to date returns of more than 23% outpace the performance of the broader S&P 500 in the same period by roughly 10 percentage points. Past performance is no indicator of future returns, so there’s a chance this diversified U.S.-focused fund could pick up if and when any infrastructure effort passes in Congress.
SPDR S&P Global Infrastructure ETF (GII)
GII is perhaps the only other option for investors looking to buy a diversified infrastructure ETF, aside from shopping in individual subsectors related to this trend — like energy storage or telecom stocks. It’s also the smallest fund here, at only about $400 million in assets, but it’s still substantial enough to be worthy of consideration.
The fund’s portfolio is another globally oriented list, but it’s perhaps the most focused of all of these options with just 75 or so total stocks and 40% of assets in the top 10 holdings. This includes a handful of energy companies such as NextEra Energy ( NEE).
Unfortunately, GII has actually underperformed most of the other funds on this list and is even slightly lagging behind the S&P so far in 2021 because its key holdings haven’t done as well as their peers. That said, greater variance could work in the fund’s favor if the chips fall right.
There’s risk in this “all eggs in one basket” approach, but it can also lead to significant outperformance if just a couple of those stocks benefit from infrastructure spending in late 2021 and beyond.
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Update 06/16/21: This story was published at an earlier date and has been updated with new information.