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Linked to the Stoxx Global Broad Infrastructure Index, the fund operates with a goal of increasing diversification with other equity assets while also providing income to investors.
The fund focuses on infrastructure ownership through a bottom-up analysis of each company’s assets, as opposed to reliance on industry classifications. It also delivers greater diversification of infrastructure exposure by providing a larger array of super sectors beyond the typical exposure to utilities, energy and transportation.
Commenting on the launch, Shundrawn Thomas, head of Northern Trust’s FlexShares Exchange Traded Funds Group, said: “Historically, infrastructure stocks have low correlation to the overall equity market, and they tend to be defensive in nature. With our ongoing focus on real world investor needs, we created this Fund first as a risk-mitigation tool that offers investors the unique characteristics of infrastructure in an effort to diversify their equity risk exposure, generate income and hedge against long-term inflation.”
Hartmut Graf, chief executive officer, Stoxx, added: “Our goal with the Stoxx Global Broad Infrastructure Index was to identify infrastructure companies across developed and emerging markets using a transparent, rule-based methodology that meets flexible indexing needs.”
The index universe for the Stoxx Global Broad Infrastructure Index is defined as all emerging and developed markets stocks in the Stoxx Global Total Market Index. To be eligible for inclusion, companies must have a minimum average daily trading volume (ADTV) of $1 million and generate at least half of their revenues from the following five sectors: communications, energy, government outsourcing/social, transportation and utilities.
To identify eligible firms and ensure they derive 50% or more of their revenues from infrastructure-related business, Stoxx has partnered with FactSet, a global provider of financial analytics and information, to use the FactSet Revere Sector and Industry Classifications and FactSet Supply Chain Relationships datasets.
The index is weighted by free-float-adjusted market capitalization. Major constituents include AT&T, Vodafone, Verizon, Union Pacific and Canadian National Railway. Communications companies form the largest weight with 30.7%, followed by energy (29.5%) and transportation (26.3%). In terms of country allocations, the United States contributes the largest weight with 39.8% followed by Japan (11.1%) and the United Kingdom (10.5%).
The fund has a net expense ratio of 0.47%.
UK and European investors looking for a locally listed infrastructure play could consider either the iShares FTSE/Macquarie Global Infrastructure 100 ETF (INFR), which offers exposure to the 100 largest stocks from developed and advanced emerging countries of the Macquarie Global Infrastructure Index, or the db X-trackers S&P Global Infrastructure ETF (XSGI) linked to the S&P Global Infrastructure Index, which tracks the performance of 75 listed infrastructure companies from around the world across three distinct infrastructure clusters: Utilities, Transportation and Energy.
Both funds are listed on the London Stock Exchange and come with TERs of 0.65% and 0.60% respectively.