Donald Trump and Hillary Clinton may differ on most issues but they agree on at least one thing: The nation's infrastructure needs some work.
And this rare bit of consensus is helping infrastructure stock funds outperform the broader market as voters get set to elect a new president who is expected to spend more on bridges and roads than under the Obama administration.
Morningstar, the Chicago investment trackers, counts 25 open-ended infrastructure stock funds and seven exchange-traded funds. All but one have beaten the Standard & Poor's 500 stock index this year. The average infrastructure fund is up 7.9%, versus 3.88% for the index.
One reason, of course, is that recommending improvements to roads, bridges, schools and ports is not something the average voter opposes, making it a safe pledge for politicians.
The
Republican platform, for example, says “Recognizing that, over time, additional revenue will be needed to expand the carrying capacity of roads and bridges, we will remove legal roadblocks to public-private partnership agreements that can save the taxpayers' money and bring outside investment to meet a community's needs.”
The
Democratic platform takes a different approach, but essentially agrees that infrastructure should be a national priority: “We will put Americans to work updating and expanding our roads, bridges, public transit, airports, and passenger and freight rail lines.”
Many of the
infrastructure funds have an international bent. The largest infrastructure fund, Deutsche Global Infrastructure A (TOLLX), has 48.9% of its assets in the U.S., with the bulk of the rest in developed nations around the world. The fund, up 6.99% this year, has its largest holding in National Grid PLC, the U.K. gas and electric company.
Most infrastructure funds have relatively low exposure to emerging markets. The Salient Emerging Markets Infrastructure A (KGIAX) is the exception, with 77.65% of its assets in emerging markets. Most other funds, however, have less than 10% in emerging markets, with the exceptions being Alpine Global Infrastructure (AIFRX), with 15.61% in emerging markets and John Hancock Enduring Assets A (JEEBX) with 13.06%.
The other attraction to infrastructure funds is that they can offer investments in relatively stable, high-yielding entities, such as toll roads,
oil pipelines and water processing plants. The largest holding of SPDR S&P Global Infrastructure ETF (GII), for example, is the Transurban Group, which runs toll roads in the U.S. and Australia. Another large holding: Enbridge, a Canadian gas pipeline company.
The idea isn't just a trendy new theme, said Steve Janachowski, CEO of Brouwer & Janachowski, a Tiburon, Calif., financial-planning firm. “These are interesting — not sexy — essential services,” Mr. Janachowski said. He recommends Brookfield Listed Global Infrastructure (BGLIX), up 10.9% this year. The fund has an index ETF twin: ProShares DJ Brookfield Global Infrastructure (TOLZ).
