Best infrastructure ETFs to watch in March 2024

World economies may be facing a difficult time at present, with inflation and war in the Middle East and Ukraine. However, despite these obstacles, one area where growth remains is global infrastructure.

Across the world, building and construction programmes continue. President Biden, former US president Donald Trump and former prime minister Boris Johnson have all approved major infrastructure programmes in recent years. Indeed, the global infrastructure market was valued at $2,242 billion in 2021, according to Mordor Intelligence, and is forecast to hit $3,267 billion by 2027.

Why ETFs are a good access point

So what’s the best way to invest in the sector? Often exchange-traded funds (ETFs) can be simpler way to access investments in these areas. These are pooled investments, which invest in a portfolio of many different companies – sometimes hundreds – but unlike actively managed funds, they automatically track certain indices. As such, they tend to have lower fees than actively managed funds, which have a human fund manager to pay.

Want to know more about ETFs? IG has a useful guide to them here.

Some of the funds focus specifically on North American infrastructure companies, such as energy and utilities providers, while others invest globally and in different sectors, such as transportation and construction.

Here are three of the top infrastructure ETFs we think might be worth watching. These have been chosen for recent market news. Past performance is not a guide to future performance.

Best infrastructure ETFs to watch

1. iShares Global Infrastructure UCITS ETF

2. Alerian Infrastructure ETF

3. SPDR S&P Global Infrastructure ETF

4. Flexshares STOXX Global Broad Infrastructure Index Fund

5. iShares Environmental Infrastructure & Industrials ETF

iShares Global Infrastructure UCITS ETF

The iShares Global Infrastructure UCITS ETF tracks the FTSE Global Core Infrastructure Index, offering investors access to companies from both emerging and developed economies. It previously tracked the Macquarie Global Infrastructure 100 Index but this was discontinued in 2017.

Launched in 2006, the fund is currently worth $1.5 billion and it has 251 holdings, with 62% of its portfolio invested in US companies and 13% in Canadian firms. Around 52% of its holdings are in utilities companies, 25% in industrials and 13% in energy providers. Its top ten holdings including Nextera Energy, Union Pacific Corp, American Tower REIT Corp, Enbridge Inc and Duke Energy.

Nextera, a leading clean energy company, is one of US’s biggest capital investors in infrastructure. Union Pacific Corporation owns and operates its eponymous railroad infrastructure across America, shipping goods all over the US, while Canadian company Enbridge transports crude oil and natural gas via its network of pipelines and also has substantial offshore wind farms.

The fund has an expense ratio of 0.65% and delivered a return of 4% over five years, 2.7% over three years and -3.2% over one year.

Alerian Infrastructure ETF

The Alerian Infrastructure ETF invests in 25 companies in the infrastructure space. Worth $522 billion, it tracks the Alerian Midstream Energy Select Index, investing in energy firms and major pipelines in North America. The fund seeks to provide total return by growing capital and income.

It aims to invest in what it calls the ‘energy renaissance’ in North America, buying into companies that own ‘real assets’, such as pipelines, processing plants and storage tanks, which Alerian believes offer protection against inflation. It also focuses on fee-based firms, which it says are less directly exposed to commodities and provide more stable cash flows than other energy sectors.

Like the iShares fund above, the Alerian Infrastructure ETF’s top ten holdings include Canadian pipeline and offshore wind provider Enbridge, which is its second-biggest biggest holding. Its largest holding (9.1%) is Energy Transfer LP, which has one of the biggest energy portfolios with assets in 41 US states, Canada and Beijing.

However, it also holds major stakes in Enterprise Product Partners, a midstream crude oil and natural gas provider based in Texas, Calgary-based TC Energy Corp, which operates oil and gas pipelines, storage facilities and power stations, and Cheniere Energy, which produces and transports liquefied natural gas. It has an expense ratio of 0.35% and delivered an annualised return of 15% over one year, 23.9% over three years and 11.8% over five years.

SPDR S&P Global Infrastructure ETF

Unlike the previous ETF, which focused solely on North American companies, SPDR’s fund invests in a diversified portfolio of infrastructure firms across the globe. Founded in 2007 and worth $383 million, it tracks the S&P Global Infrastructure Index, which includes 75 of the world’s biggest infrastructure stocks. Holdings are diversified across the utilities, energy and transportation infrastructure sectors. Around 37% of its holdings are in the US, with 9% in Australia, 8.9% in Spain, 8.8% in Canada and 7% in Mexico. However, it also has investments in Japan, the UK, China and Singapore.

Its biggest investment is in Spanish firm Aena, which manages 46 airports and two heliports in Spain. Other major holdings include Australian company Transurban, which operates toll roads in its home country and in Canada and the US, Spanish energy provider Iberdrola and US energy firm Dominion Energy Inc. SPDR S&P Global Infrastructure ETF also has investments in Enbridge, Nextera Energy and Duke Energy.

The fund’s gross expense ratio is 0.4% and the ETF has delivered an annualised return in net asset value of 6.1% over one year, 5.3% over three years and 6.6% over five years.

Flexshares STOXX Global Broad Infrastructure Index Fund

The Flexshares STOXX Global Broad Infrastructure Index ETF tracks the STOXX Global Broad Infrastructure Index. The US-listed fund is currently worth $2.2 billion and has 207 holdings in its portfolio. Some of its top 10 investments include railway lines and operators Canadian National Railway, Canadian Pacific Kansas City, as well as telecoms giants Comcast, Deutsche Telecom, Nippon Telegraph and Telecom and Verizon.

The top 10 holdings account for 29% of the fund. Geographically, 39% of the ETF’s investments are in the US, 17% in Canada, 11.5% in Japan and 6.5% in Germany. The bulk of its holdings are spread across the energy (29%), communications (29%), transportation (25%) and utilities (8%) sectors.

In terms of performance, the ETF has delivered a return of 3.7% over one year, 2.9% over three years and 5% over five years. The expense ratio is 0.47%.

iShares Environmental Infrastructure & Industrials ETF

A fund with a different focus is the iShares Environmental Infrastructure & Industrials ETF. Worth just $4.4 million - tiny compared to the previous ones in our list - the fund seeks to track the FTSE Green Revenues Select Infrastructure and Industrials Index. This index is made up of global companies providing green infrastructure solutions, aiming to reduce emissions and support energy efficiency around the globe. Its top 10 holdings include Westinghouse Air Brake Technologies, Xylem Inc, Pentair, American Water Works and Advanced Drainage Solutions.

The expense ratio is 0.47%. Over one year, the ETF has delivered a return of 13.7% and 15.3% since inception in 2022.

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