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Is iShares U.S. Infrastructure ETF (IFRA) a Strong ETF Right Now?

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The iShares U.S. Infrastructure ETF (IFRA - Free Report) was launched on 04/03/2018, and is a smart beta exchange traded fund designed to offer broad exposure to the Utilities/Infrastructure ETFs category of the market.

What Are Smart Beta ETFs?

The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.

Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.

However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.

This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.

The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.

Fund Sponsor & Index

The fund is managed by Blackrock. IFRA has been able to amass assets over $1.72 billion, making it one of the average sized ETFs in the Utilities/Infrastructure ETFs. This particular fund, before fees and expenses, seeks to match the performance of the NYSE FACTSET U.S. INFRASTRUCTURE INDEX .

The NYSE FactSet U.S. Infrastructure Index comprises of equities of U.S. companies that have infrastructure exposure and that could benefit from a potential increase in domestic infrastructure activities.

Cost & Other Expenses

Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.

Annual operating expenses for IFRA are 0.30%, which makes it one of the cheaper products in the space.

The fund has a 12-month trailing dividend yield of 1.84%.

Sector Exposure and Top Holdings

ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.

This ETF has heaviest allocation in the Utilities sector - about 48% of the portfolio. Industrials and Materials round out the top three.

Taking into account individual holdings, Danimer Scientific Inc Class A (DNMR - Free Report) accounts for about 0.83% of the fund's total assets, followed by Pnm Resources Inc (PNM - Free Report) and Sjw Group (SJW - Free Report) .

Its top 10 holdings account for approximately 7.95% of IFRA's total assets under management.

Performance and Risk

So far this year, IFRA has lost about -0.56%, and is up roughly 4.67% in the last one year (as of 08/30/2022). During this past 52-week period, the fund has traded between $32.87 and $39.92.

The fund has a beta of 1.03 and standard deviation of 27.57% for the trailing three-year period. With about 163 holdings, it effectively diversifies company-specific risk.

Alternatives

IShares U.S. Infrastructure ETF is a reasonable option for investors seeking to outperform the Utilities/Infrastructure ETFs segment of the market. However, there are other ETFs in the space which investors could consider.

IShares Global Infrastructure ETF (IGF - Free Report) tracks S&P Global Infrastructure Index and the Global X U.S. Infrastructure Development ETF (PAVE - Free Report) tracks INDXX U.S. Infrastructure Development Index. IShares Global Infrastructure ETF has $3.54 billion in assets, Global X U.S. Infrastructure Development ETF has $3.93 billion. IGF has an expense ratio of 0.40% and PAVE charges 0.47%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Utilities/Infrastructure ETFs.

Bottom Line

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.

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