Infrastructure exchange-traded funds (ETFs) provide exposure to companies that build and maintain major projects and systems such as roads, bridges, waterways, railways, communication networks, and electricity systems. Companies in the infrastructure sector include Dominion Energy Inc. (D), Fortis Inc. (FTS), and Consolidated Edison Inc. (ED). Investors seeking to own a diversified basket of infrastructure companies, rather than betting on an individual stock, might consider an infrastructure ETF.
Infrastructure companies are likely to benefit even if only a portion of U.S. President Joe Biden's nearly $2.3 trillion Jobs Plan is approved by Congress. Unveiled at the end of March, the plan faces strong opposition from Republicans regarding proposed tax increases to pay for it. Biden's jobs program includes $1.3 trillion for infrastructure, which would primarily be aimed at boosting transportation and community infrastructure, including: building, repairing, and upgrading highways; providing affordable housing; building new schools; and more.
- The infrastructure sector underperformed the broader market over the past year.
- The ETFs with the best 1-year trailing total return are PAVE, IFRA, and ENFR.
- The top holdings of these ETFs are Nucor Corp., BlueLinx Holdings Inc., and Enbridge Inc., respectively.
There are 7 distinct infrastructure ETFs that trade in the U.S., excluding inverse and leveraged ETFs, as well as funds with less than $50 million in assets under management (AUM). The infrastructure sector, as measured by the S&P Global Infrastructure Index, has underperformed the broader market with a total return of 32.0% over the past 12 months compared to the S&P 500's total return of 50.0%, as of May 6, 2021. The best-performing infrastructure ETF, based on performance over the past year, is the Global X U.S. Infrastructure Development ETF (PAVE). We examine the best 3 infrastructure ETFs below. All numbers below are as of May 12, 2021.
- Performance over 1-Year: 100.9%
- Expense Ratio: 0.47%
- Annual Dividend Yield: 0.34%
- 3-Month Average Daily Volume: 2,227,534
- Assets Under Management: $3.5 billion
- Inception Date: March 6, 2017
- Issuer: Mirae Asset
PAVE tracks the INDXX U.S. Infrastructure Development Index, which provides exposure to infrastructure activity in the U.S. by companies that provide raw materials and heavy equipment, as well as companies engaged in physical construction and engineering. The ETF is comprised of companies with various market capitalizations, which are involved in various aspects of infrastructure development. The majority of its holdings are within the industrials sector, followed by the materials and information technology sectors. The fund follows a blended strategy, investing in a mix of growth and value stocks. Its top three holdings include Nucor Corp. (NUE), a producer of steel and related products; Deere & Co. (DE), a manufacturer of agricultural, construction, and forestry machinery; and Kansas City Southern (KSU), a railroad company.
- Performance over 1-Year: 71.9%
- Expense Ratio: 0.40%
- Annual Dividend Yield: 1.57%
- 3-Month Average Daily Volume: 239,931
- Assets Under Management: $555.6 million
- Inception Date: April 3, 2018
- Issuer: BlackRock Financial Management
IFRA tracks the NYSE FactSet U.S. Infrastructure Index, an index composed of U.S. companies that benefit from increases in infrastructure activity. The ETF provides exposure to a range of infrastructure companies, including railroads and utilities, materials and construction companies, and more. It follows a blended strategy, investing in a mix of value and growth stocks across the market cap spectrum. The fund's largest exposure is in the utilities sector, followed by industrials and materials. Its top three holdings include BlueLinx Holdings Inc. (BXC), a wholesale distributor of building and industrial products; Kansas City Southern; and Unitil Corp. (UTL), an electricity and natural gas utility company.
- Performance over 1-Year: 49.3%
- Expense Ratio: 0.65%
- Annual Dividend Yield: 6.12%
- 3-Month Average Daily Volume: 22,287
- Assets Under Management: $57.4 million
- Inception Date: Oct. 31, 2013
- Issuer: SS&C
ENFR tracks the Alerian Midstream Energy Select Index, which is comprised of a group of North American infrastructure companies engaged in the transportation, storage, and processing of energy commodities. The ETF provides exposure to midstream energy infrastructure companies within North America. The fund's largest exposure is in companies that offer pipeline transportation of natural gas and/or petroleum, followed by companies engaged in energy gathering and processing. Geographically, nearly two thirds of its holdings are located in the U.S. with the other third based in Canada. ENFR follows a blended strategy of investing in both growth and value stocks of various market capitalizations. Its top three holdings include Enbridge Inc. (ENB), a Canada-based multinational energy transportation company; Enterprise Products Partners L.P. (EPD), a midstream natural gas and crude oil pipeline company; and TC Energy Corp. (TRP), a Canada-based energy infrastructure company.
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