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U.S. Infrastructure Is Aging And In Dire Need Of A Refresh

By Mary-Lynn Cesar New York Governor Andrew Cuomo and Vice President Joe Biden made a joint appearance Monday afternoon to announce major infrastructure upgrades to LaGuardia Airport. Adding to Biden’s ” third-world country ” description of LaGuardia, Cuomo said the airport was ” un-New York ” and revealed that construction on a new LaGuardia airport will begin next year. The project is expected to cost the Port Authority of NY & NJ $4 billion . LaGuardia is but one example of US infrastructure that badly needs an update. There are the Hudson River rail tunnels -which service Amtrak and NJ Transit trains between New York and New Jersey-the Albion River Bridge in coastal California and the nation’s wastewater and drinking water systems , to name a few. According to the American Society of Civil Engineers’ 2013 report card , which assesses and grades all segments of US infrastructure, things are in poor shape. The overall grade was a D+, and an estimated $3.6 trillion would need to be invested in infrastructure by 2020 to improve the situation. Per Governing.com, the five largest infrastructure projects currently underway in the US are the Dulles International Airport Corridor Metrorail Project, Otay Mesa East port facility construction, modernization of O’Hare International Airport, expansion of the Crescent Corridor freight rail network and replacing the Alaskan Way Viaduct. Combined the projects will cost $21.4 billion. While there are trillions that need to be invested in US infrastructure, the fact remains that they haven’t been yet. Perhaps this is why infrastructure ETFs with exposure to potential US projects haven’t been performing well. In fact, all of the following funds have underperformed the market on a monthly quarterly and year-to-date basis. Could the LaGuardia airport project help some of these ETFs turn things around? Deutsche X-trackers S&P Hedged Global Infrastructure ETF (NYSEARCA: DBIF ) ( Earnings , Analysts , Financials ): Seeks to track the performance of equity securities of infrastructure issuers in developed markets. Net assets under management: $3.53M, most recent closing price: $23.77. The fund has underperformed the market by -3.22% over the last month, -5.54% over the last quarter and -4.66% since the beginning of the year. SPDR S&P Global Infrastructure ETF (NYSEARCA: GII ) ( Earnings , Analysts , Financials ): Seeks to reflect the stock performance of companies within the infrastructure industry, principally those engaged in management, ownership and operation of infrastructure and utility assets. Net assets under management: $97.83M, most recent closing price: $46.08. The fund has underperformed the market by -4.46% over the last month, -8.40% over the last quarter and -3.64% since the beginning of the year. iShares Global Infrastructure ETF (NYSEARCA: IGF ) ( Earnings , Analysts , Financials ): Seeks to replicate the S&P Global Infrastructure Index. Net assets under management: $1.20B, most recent closing price: $40.05. The fund has underperformed the market by -4.09% over the last month, -8.00% over the last quarter and -3.79% since the beginning of the year. ProShares DJ Brookfield Global Infrastructure ET (NYSEARCA: TOLZ ) ( Earnings , Analysts , Financials ): Seeks to replicate Dow Jones Brookfield Global Infrastructure Composite Index. Net assets under management: $25.99M, most recent closing price: $40.55. The fund has underperformed the market by -5.60% over the last month, -10.04% over the last quarter and -7.10% since the beginning of the year. (Monthly return data sourced from Zacks Investment Research. Assets data sourced from Yahoo! Finance. All other data sourced from FINVIZ.) Share this article with a colleague

Inside Guggenheim’s New High Income Infrastructure ETF

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 hold 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. Competition 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 was 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 winning trend to continue in the days to come. 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.