ETF Securities launches infrastructure ETFs

ETF Securities has listed two global and emerging infrastructure ETFs on the London Stock Exchange.

The ETFX Dow Jones Brookfield Global Infrastructure and Emerging Markets Infrastructure funds are part of the company's ETF Exchange (ETFX) equity platform, meaning they are synthetically replicated using a multi-counterparty swap model.

The funds are the first ETFs in Europe to track their underlying Dow Jones indices, designed to offer broader and more focused exposure to infrastructure equities.

Maintained in partnership with Brookfield Asset Management, all companies in the Global Infrastructure index derive at least 70% of cash flows from infrastructure, down to 50% for constituents of the Emerging Markets Infrastructure index.

Deborah Ciervo, senior director of international markets and products at Dow Jones Indexes, says this emphasis distinguishes the Dow Jones indices from those offered by S&P and Macquarie as a "pure-play". Other benchmarks also tend to be heavily weighted to utilities, while Dow Jones excludes service providers.

Despite their apparent similarities, ETF Securities' two ETFs target distinct themes, as demonstrated by an investment overlap across just nine companies.

The ETFX Dow Jones Brookfield Global Infrastructure ETF is heavily weighted towards the Americas and Europe. With an emphasis towards developed markets, this fund is largely a play on the upgrading and maintenance of current projects, and increasingly on green technologies.

In the aftermath of the global financial crisis, governments across developed markets have cut spending on infrastructure, with around 200 projects cancelled in Spain alone. However, ETF Securities senior analyst Martin Arnold says that this has fuelled efforts to increase infrastructure spending in the private sector, and points out that both the US and Eurozone stimulus packages included commitments in the space.

He adds: "Infrastructure generates real employment. In my opinion, it is a good way of developing and sustaining growth in developed markets."

The ETFX Dow Jones Brookfield Global Emerging Markets Infrastructure ETF, meanwhile, invests over half its assets in Asia. Arnold says that the emerging markets are likely to drive infrastructure growth as they go through a period of rapid urbanisation and industrialisation.

The infrastructure ETFs are designed to capitalise on long-term global growth. ETF Securities points to the OECD's estimate that annual infrastructure spending of 3.5% of world GDP is required out to 2030 - an expected $40trn over the next 20 years.

The company also argues that the launch offers diversification benefits against equities, while the underlying Dow Jones indices have outperformed real estate and commodities over the long-term.