In this weekend’s video I did a brief recap of my time with the Macquarie Infrastructure Trust (MIC) and what has happened with a couple of their CEFs in this bear market.
A reader asked how should the infrastructure theme be accessed given how badly the Macquarie products have done. The reader presumes that the theme is worth allocating to, and I agree.
There are several ETFs but they each target different areas within the space. The SPDR FTSE/Macquarie Global Infrastructure 100 ETF (GII) is 90% utilities and so tracks closely with that sector. The PowerShares Emerging Markets Infrastructure Portfolio (PXR) is 40% materials and perhaps confusingly has non emerging market stocks in it (a company that sells to emerging market countries can be included). The iShares S&P Global Infrastructure Index ETF (IGF) is mostly an even mix of industrials and utilities with a little pipeline thrown in. Included in IGF are some of the cash flow segments like toll roads and airports. I use IGF in some portfolios.
IGF is down a lot, but less in the trailing twelve months than the Industrial Sector SPDR (XLI).
One way to buy in, but not what I am doing or will do in the future, would be to use GII as a proxy for utilities, PXR for materials and IGF for industrials (IGF has tracked much closer to industrials than utilities). All three funds track their corresponding sectors closely enough that I think they are suitable sector proxies with the hope of outperforming whenever the theme starts to matter.
I think of this as something to unfold over most of a decade, like emerging markets were in the oughts (or, if you prefer, the noughties). In looking ahead like that, I believe that the theme will be best captured by including individual stocks into whatever you do. IGF and PXR include a lot of stocks that will build the roads or provide the technology needed for any sort of project, but they aren’t that heavy in the cashflows that the engineers and systems company will be creating. Actually IGF has about 25% in these stocks. For now, building the stuff is probably more important than the cashflow from the finished product, but that will not always be the case.