After years of neglect and just in time for an election year, states across the U.S. are finally devoting dollars to infrastructure projects, a theme that could propel the FlexShares STOXX Global Broad Infrastructure Index Fund (NYSEArca: NFRA) in 2020.
NFRA tries to reflect the performance of the STOXX Global Broad Infrastructure Index, which identifies equities that derive the majority of revenue from infrastructure business, providing exposure to not only infrastructure sectors, but non-traditional ones as well.
“Buoyed by a recovering economy and increases in their revenue, states from Utah to Florida are pumping more money into transportation projects to speed up traffic-clogged highways and modernize aging infrastructure,” reports Dow Jones. “The 50 states collectively spent $113.2 billion on transportation in the fiscal year 2019, a 9% jump from the previous year, according to the National Association of State Budget Officers. It was the biggest jump since 2015, and transportation industry trackers said they expect spending boosts to continue in 2020.”
A Good Time To Spend On Infrastructure
NFRA’s index focuses on long-lived assets in industries with very high barriers to entry, with at least 50% of their revenue from key sectors with a 3-month average daily trending volume of at least $1 million. The portfolio is weighted based on a free-float market cap with certain constraints to limit exposure in any one security, sub-sector, or country. Additionally, the fund is rebalanced annually.
“State transportation departments and local governments are projected to spend $77.5 billion on highway and street construction investments alone in 2020, a 6% increase over 2019, according to the American Road & Transportation Builders Association,” reports Dow Jones.
Moreover, the state-level opportunity set for NFRA could be long-ranging and last several years, if not longer, particularly as larger states enter the infrastructure spending fray.
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