Infrastructure Indexes

Posted by Bull Bear Trader | 7/22/2008 10:30:00 AM | , , , , | 0 comments »

Structured Products is reporting on the new Dow Jones Brookfield Infrastructure Indexes, covering companies in the airport, pipeline, ports, toll road, communication, electricity transmission and distribution, oil and gas storage and transportation, and water sectors. The index comprises the Global Infrastructure and Composite index, regional sub-indexes for the Americas, Europe, and Asia-Pacific, eight global sector sub-indexes, and the Infrastructure MLP index. Companies included must have a market cap of $500 million, minimum 3-month average daily trading volume of $1 million, and derive more than 70% of cash flows from the development, ownership, lease, or management of infrastructure assets.

In 2006, the Office of Science and Technology estimated that global infrastructure investment is projected to exceed $20 trillion. To take advantage of global growth, the index is spread over more than 20 countries, with the U.S. and Great Britain have the largest allocations at 37.55% and 19.44%, respectively. All other country allocations are below 10%. Of interest is that China is only at 2.69% and India is not even on the list. As for components, National Grid PLC (NYSE: NGG) comes in at a weighting of 10.16%, Spectra Energy Corp. (NYSE: SE) at 5.98%, and American Tower Corp. (NYSE: AMT ) at 5.56%. All other companies are at a weight less than 5%. Total returns in US dollars were 16.26% in 2007, but -9.75% YTD. While down, the return is still greater than the -14.17% in the S&P 500 YTD. As (or if) ETFs are developed based on the index, companies in the index should see increased buying pressure.

Global Infrastructure 100 For those looking to invest directly in infrastructure, there is the SPDRFTSE/MacquarieETF (GII). The GII is currently down -7.68% YTD. Again, not bad compared to the S&P 500. Utilities are its largest holding at nearly 80%. Another potential investment in infrastructure with a little more group diversification is the iShares S&P Global Infrastructure Index (IGF). Of interest is that the IGF fund may invest in futures contracts, options, options on futures contracts, and swaps that are related to its underlying index. Utilities are its largest holdings at over 40% weighting, energy at just below a 23% weighting, and business services slightly below a 34% weighting. The diversification is not helping this year given that the return for IGF is down 14.59% YTD.