Comparing the Infrastructure ETFs

by: Tom Lydon

Before you buy an ETF, you should take a few minutes to pop the hood and have a look-see. Skip this crucial step and you could wind up with an unwanted surprise.

This is especially important when you’re comparing multiple funds across the same asset class or sector. Take, for an example, infrastructure.

Currently, there are more than half a dozen infrastructure ETFs that all include the word “infrastructure” in the name and target the same area, notes Roger Nusbaum for TheStreet. However, each fund is different, with its own set of attributes.

The infrastructure sector is expected to see a strong tailwind as it gets a copious cash infusion over the next few years. More than $1 trillion is allocated in India alone for 2012-17. Still, risks include normal market volatility, inefficient allocation of money and potential corruption.

The SPDR FTSE/Macquarie Global Infrastructure 100 ETF (NYSEARCA:GII) was the first ETF in the space. GII has a large weighting of 85% in utilities, which makes it less volatile than other infrastructure funds. The fund didn’t plummet during the downturn, but it also didn’t go up as much when the markets improved. The risk here, though, is that utilities will get hit when interest rates rise as money flows to bonds.

The PowerShares Emerging Markets Infrastructure Portfolio (NYSEARCA:PXR) is heavily weighted toward industrial stocks at 56% and also allocates 40% to material stocks. The high allocation to materials, along with its emerging market status, makes the fund rather volatile. The fund could do poorly if the markets go down or if commodities correct.

Emerging Global Shares also provides a kind of middle ground between GII and PXR, with its EG Shares India Infrastructure ETF (NYSEARCA:INXX), EG Shares Brazil Infrastructure ETF (NYSEARCA:BRXX) and EG Shares China Infrastructure ETF (NYSEARCA:CHXX). The three funds are a little more balanced at the sector level as compared to either GII or PXR, but the funds will be largely affected by any corrections in their respective markets.

Max Chen contributed to this article.