Lyxor has launched an infrastructure ETF range designed to provide income from between 2.95 per cent from US companies in the infrastructure sector, to 4.06 per cent from those based in Europe.
The Lyxor FTSE USA Core Infrastructure Capped UCITS ETF and Lyxor FTSE Developed Europe Core Infrastructure Capped UCITS ETF invest in infrastructure companies involved in transportation, energy or telecommunications as they could be the first to benefit as countries such as America look to replace their “aging infrastructure”.
Lyxor writes that a recent report by PWC suggests that infrastructure spending could grow to more than USD9 trillion per year by 2025.
The firm writes that for yield hunters, infrastructure companies can generate a steady source of income, which is naturally less sensitive to short term market cycles and hedged against inflation. This is because projects are typically long term in nature, and contracts are often linked to inflation. In addition, household usage of electricity, gas and water may be relatively constant, providing a regular source of revenue.
The FTSE Core Infrastructure Indexes provide exposure to 64 US or 33 Developed Europe companies that derive at least 65 per cent of their revenue from the development, ownership, operation, management and/or maintenance of transportation, energy or telecommunications infrastructure. The indices specifically limit exposure to Utilities in order to avoid value traps and reduce rate sensitivity.
Francois Millet (pictured), Head of Product Line Management – ETFs & Indexing at Lyxor said: “Our new infrastructure ETFs provide investors access to an increasingly important source of stable, inflation linked returns for just 0.50 per cent per year.