Should Investors Put Money in Infrastructure?

Posted by FlexShares on May 30, 2017 8:39:16 AM


Robust infrastructure is crucial for growing and enriching economies. In the wake of the global economic crisis, how will nations fund state-of-the-art bridges, toll roads, airports, seaports, and data towers? Governments are relying more often on privatization. In accordance with shifts in economic and political policies, governments around the world are using privatization for many large mission-critical projects. Investors, for their part, may be attracted by the chance for equity exposure as well as the bonus benefit of an asset with intrinsic value, predictable expenditures, and stable cash flows.

Global infrastructure investing may fulfill certain portfolio strategies and achieve long-term goals that traditional stock and bond markets may not deliver. The question for some investors is: Why lock up capital for 10-25 years? Listed infrastructure vehicles have emerged as a potentially viable alternative to liquidity constraints of direct ownership. This advantage has ignited a demand for exchange-traded funds that track infrastructure-related stocks. Now, advisors and their clients can tap possibilities once afforded only to large institutional and private equity investors.

For potentially lower fees than direct ownership, we believe global infrastructure ETFs deliver a simplified investment process and offer increased diversification. The structure of these innovative products provides exposure not only to developed markets like the U.S., but also the untapped potential of emerging markets. The lure of this product category includes the potential for strong yields and lower correlation ( i.e. linkage or dependency) to other asset classes. And while infrastructure ETFs may experience a higher correlation than direct ownership to the equity markets, we believe this hazard may potentially be minimized within the strategic focus of an ETF.

FlexShares, a leading developer of ETFs, has worked with STOXX® Ltd. to introduce the FlexShares STOXX® Global Broad Infrastructure Index Fund (NFRA). The fund's unique structure seeks to deliver a portfolio of global infrastructure equities that can increase diversification while also providing income to investors. The focus of NFRA includes mature, fully established assets with stable cash flows and with a greater correlation to inflation than infrastructure strategies limited to emerging markets.

Whatever their portfolio goals, FlexShares wants to help investors stay informed and make better investment decisions. Learn more about "The Case for NFRA Infrastructure Investing" in this report.

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FlexShares STOXX® Global Broad Infrastructure Index Fund (NFRA) is subject to infrastructure-related companies risk and MLP risk. Risks associated with infrastructure-related companies include: realized revenue volume may be significantly lower than projected and/or there will be costs overruns; infrastructure project sponsors will alter their terms making a project no longer economical; macroeconomic factors such as low gross domestic product ("GDP") growth or high nominal interest rates will raise the average cost of infrastructure funding; government regulation may affect rates charged to infrastructure customers; government budgetary constraints will impact infrastructure projects; and special tariffs will be imposed.

The STOXX® Global Infrastructure Index is the intellectual property (including registered trademarks) of STOXX® Limited, Zurich, Switzerland and/or its licensors ("Licensors"), which is used under license. The securities based on the Index are in no way sponsored, endorsed, sold or promoted by STOXX® and its Licensors and neither of the Licensors shall have any liability with respect thereto.

Tags: 2017 Funds