Smart Beta Exchange-Traded Fund Offers Broad Exposure to Utilities/Infrastructure Market

The iShares U.S. Infrastructure ETF (IFRA) was launched on April 3, 2018, providing investors with a new and innovative way to access the utilities and infrastructure sector of the market. This exchange-traded fund (ETF) offers broad exposure to the utilities and infrastructure sector, which is expected to benefit from increased government spending on infrastructure projects.

What Are Smart Beta ETFs?

Smart beta ETFs have been gaining popularity in recent years as a viable alternative to traditional market capitalization-weighted indexes. These funds focus on tracking non-cap weighted strategies that seek to pick stocks with better risk-return profiles based on specific fundamental characteristics. The space offers various methodologies, including equal-weighting, fundamental weighting, and volatility/momentum-based weighting, but not all of these strategies have delivered superior results.

Fund Sponsor & Index

IFRA is managed by one of the largest asset managers in the world, BlackRock. With over $3.11 billion in assets under management (AUM), IFRA ranks among the larger ETFs in its category. The fund seeks to track the NYSE FactSet U.S. Infrastructure Index before fees and expenses. This index comprises equities of U.S. companies that have infrastructure exposure and could benefit from increased domestic infrastructure activities.

Cost & Other Expenses

Investors should also pay attention to an ETF's expense ratio, as lower-cost products tend to produce better results over the long term. Annually, IFRA has an operating expense ratio of 0.30%, making it a relatively inexpensive option in its category. The fund's 12-month trailing dividend yield is 1.69%.

Sector Exposure and Top Holdings

Despite offering diversified exposure through a portfolio of around 158 holdings, the fund has heaviest allocations to the utilities sector (about 42.1%), followed by industrials and materials. Hawaiian Electric Industries Inc (HE) accounts for about 0.84% of the total assets under management, while Primoris Services Corp (PRIM) and Tutor Perini Corp (TPC) also feature within the top holdings.

Performance and Risk

The ETF has delivered impressive returns so far this year, adding around 15.89%. Over the past 52-week period, it has traded between $40.97 and $52.98. IFRA's beta is 1.00, and standard deviation for the trailing three-year period is 17.45%, showcasing both the investment and volatility potential of this fund.

Alternatives

For investors seeking alternatives to IFRA, other notable ETFs in the space include iShares Global Infrastructure ETF (IGF) and Global X U.S. Infrastructure Development ETF (PAVE). These funds track their respective indexes but come with varying expense ratios, reflecting different levels of investment risk. In this instance, IGF has a lower expense ratio at 0.39%, while PAVE stands at 0.47%.