After President Biden swept into office in November 2020, one of the first big agenda items was a massive infrastructure spending bill. It took a lot longer than some had hoped, but a year later in November 2021 Congress finally passed a $1 trillion spending package and the president signed it into law. It’s important to note, however, that the final package did not include some items on the original spending agenda targeting so-called “social infrastructure including health care or education.” That left a traditional infrastructure bill that was focused on roads, bridges and similar items. As the money starts to roll out of Washington and into local communities this year, investors who want to tap into this spending should consider the following infrastructure exchange-traded funds, or ETFs, to play this trend:
— 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)
— First Trust NASDAQ Clean Edge Smart Grid Infrastructure Index Fund (GRID)
Global X US Infrastructure Development ETF (PAVE)
PAVE is the largest dedicated infrastructure ETF on Wall Street, with more than $4 billion in assets under management. Its holdings consist of domestic, publicly traded stocks involved in construction materials, heavy equipment, engineering and construction.
Despite a targeted approach, the total portfolio is actually quite extensive with about 100 total positions, including steelmaker Nucor Corp. (NUE), machinery giant Deere & Co. (DE) and construction materials company Fastenal Co. (FAST). It’s also pretty darn diversified, too, with no single position representing more than about 4% of the portfolio at present.
The fund has dropped in 2022 along with the rest of Wall Street, but has fared slightly better than the S&P 500 year-to-date.
iShares Global Infrastructure ETF (IGF)
While the U.S. infrastructure bill is certainly a domestic priority, it’s worth pointing out this globally focused fund here because the size of the $1 trillion spending agenda could certainly make its way into the hands of some of the larger global players out there. And besides, with this infrastructure ETF posting a small profit so far in 2022, even while the rest of Wall Street has suffered, it’s worth a look based on performance alone.
Keep in mind this fund, valued at more than $3 billion in total assets, is not exclusive to international stocks. Nearly 40% of assets are in U.S.-headquartered companies, in fact. Furthermore, some of the 75 stocks in this ETF, like Australia-based toll road operator Transurban Group (TCL.AX), do a brisk business in the U.S.
FlexShares STOXX Global Broad Infrastructure Index Fund (NFRA)
Though slightly smaller with about $2 billion or so in assets, NFRA is perhaps the largest infrastructure ETF out there as measured by holdings with a list of nearly 180 stocks in the current portfolio. It also has a lineup that’s a bit different than some of these other funds, including railroads like Union Pacific Corp. (UNP), energy pipeline companies like Enbridge Inc. (ENB) and even telecom companies.
As stated before, the original infrastructure bill was in largely traditional areas. However, it was not exclusively a highway bill. For instance, the package also includes about $1.5 billion in prior spending for the all-important “Northeast Corridor” of Amtrak among other railroad-specific items.
Though not in the green year to date, NFRA has held pretty tough with a small decline even as the S&P 500 has lost about 17% since Jan. 1. That shows this level of diversification may provide a bit more stability for this fund.
iShares U.S. Infrastructure ETF (IFRA)
A smaller infrastructure fund, IFRA is still legitimate and liquid with more than $1 billion in total assets. As with the other funds on this list, it is tied to an index composed of equities of U.S. companies that have infrastructure exposure — specifically, those that could benefit from domestic infrastructure activities within the U.S.
This iShares infrastructure ETF is among the most diversified on this list, with a deeper list of 150 or so total holdings and no single stock representing more than about 1% of the entire portfolio at present. That includes energy and utility stocks related to the power grid as well as traditional infrastructure stocks. Once again that diversification has helped IFRA post a return that is almost flat compared with the deep declines the S&P 500 has suffered this year.
First Trust NASDAQ Clean Edge Smart Grid Infrastructure Index Fund (GRID)
Last but not least, this First Trust infrastructure ETF is dedicated to the electricity side of infrastructure with a play on energy, electrical component and utility stocks. With more than $500 million in assets, this fund is no small fry despite its very targeted nature. And with about 80 total components, it’s not overly dependent on a few large players and offers a truly diversified approach to this spending area. The fund’s holdings include electrical component giant Eaton Corp. PLC (ETN) and solar power company Enphase Energy Inc. (ENPH), among others.
Unfortunately, given the fact that a large chunk of dedicated clean energy grants and “smart grid” investments were from the original bill, GRID has posted the worst performance of any infrastructure ETF on this list. However, the fact that climate change remains a real risk and our energy grid is only getting older, longer-term investors may want to consider a position in GRID as a way to play ongoing spending in this area of infrastructure.
More from U.S. News
Update 05/24/22: This story was published at an earlier date and has been updated with new information.