[Real Investment] Restructuring Your Portfolio with 'Infrastructure Investment ETFs'

World's Largest Asset Manager Predicts Growth in Infrastructure Market
Attractive for Economic Defense, Risk Diversification, and Dividend Yield

Editor's NoteIt has already been about a month since the New Year 2024 began. With ongoing inflation, geopolitical crises in the Middle East and Ukraine, continuing US-China tensions, and the upcoming US presidential election in November, experts find it difficult to predict this year's market easily. Although the environment remains challenging, interest in new investment opportunities does not fade. If you are considering portfolio diversification, take a look at exchange-traded funds (ETFs) that invest in infrastructure and bonds.

BlackRock, the world's largest asset management company based in the United States, recently acquired the private equity fund specialized in infrastructure, 'Global Infrastructure Partners' (GIP), for approximately 16 trillion KRW. BlackRock explained the background of this acquisition decision by stating, "The current infrastructure market, valued at 1 trillion USD (about 1,300 trillion KRW), is expected to be the fastest-growing sector in the private market over the next few years," and added, "Several long-term structural trends support the acceleration of investment in the infrastructure sector." Infrastructure refers to the basic facilities and systems that form the foundation of economic activity. It includes social overhead capital (SOC) closely related to economic activities such as roads, electricity, telecommunications, ports, and airports. Although there are few infrastructure companies domestically, the global market, including the US, has various types of infrastructure companies such as digital infrastructure, energy infrastructure, and social infrastructure. The global digital environment build-out, global supply chain restructuring, and the need for infrastructure recovery after wars are increasing demand for infrastructure investment. In particular, demand for improvements in the digital infrastructure sector, including broadband networks, mobile phone base stations, and data centers, is rising worldwide. Additionally, investments in logistics hubs such as airports, railroads, and ports are resuming due to global supply chain restructuring, and efforts related to carbon emission reduction and energy security are being made worldwide. Global asset management firm Macquarie Asset Management also identified infrastructure and other real assets as promising investment destinations this year. Infrastructure investment is attractive due to its defensive characteristics against economic cycles, inflation risk diversification ability, and relatively high dividend yields. It also benefits from long-term trends such as energy transition and digitalization. Although infrastructure sectors with high growth potential may be somewhat unfamiliar to general investors, they can access them through ETFs.

Mirae Asset Global Investments' 'TIGER S&P Global Infrastructure (Synthetic)' is the only ETF in the TIGER ETF lineup that invests in global infrastructure. It diversifies investments across infrastructure industries in representative industrial goods, energy, and utility sectors by country. The composition is approximately 41% industrial goods, 38.6% equipment, and 19.9% energy. It invests in 18 countries, including the United States. By weight, it consists of the US 36.7%, Australia 9.2%, Canada 8.7%, and Spain 8.6%. The underlying index is the S&P Global Infrastructure index. As of the 19th, it recorded a 1-month return of 0.32%, a 3-month return of 7%, and a 6-month return of 3.26%. A representative from Mirae Asset Global Investments said, "Although the global infrastructure market is currently challenging, if conditions such as interest rate cuts and economic recovery are met, it is expected to show high returns in the future due to issues like infrastructure reconstruction caused by wars."

Hanwha Asset Management's 'ARIRANG US Alternative Investment Top 10 MV' ETF invests in 10 large US-listed alternative investment specialized companies with over 75% of sales derived from alternative assets. This ETF invests broadly in alternative assets, including private equity (PE), venture capital (VC), and business development companies (BDC). The portfolio includes many globally recognized alternative investment firms listed in the US, such as ▲KKR ▲Blackstone ▲Apollo Global Management ▲Brookfield Asset Management. Due to its low correlation with traditional assets, it allows portfolio diversification and can be used as an inflation hedge. According to FundSquare, the ARIRANG US Alternative Investment Top 10 MV ETF recorded returns of 20.64% over the past 6 months, 40.03% over 1 year, and 46.20% since inception as of the 17th. A Hanwha Asset Management representative said, "Alternative investments such as real estate, infrastructure, and commodities have traditionally been markets dominated by high-net-worth individuals and institutional investors due to information asymmetry, long investment periods, large investment amounts, and subscription restrictions. Therefore, for individual investors to engage in alternative investments, investing in alternative investment specialized companies through ETFs listed on the stock market is the most effective strategy."

High Growth Potential in the Global Infrastructure Market

Investment Demand in Digital and Energy Sectors

Attractive Defensive, Risk Diversification, and Dividend Yield Characteristics

KB Asset Management plans to launch the 'KBSTAR Global Realty Income ETF' next month. This monthly dividend ETF optimizes income returns by investing in the US representative REIT 'Realty Income,' which is most favored by domestic investors, and 'Macquarie Infrastructure,' the largest listed infrastructure fund in Korea. A KB Asset Management representative said, "In a phase of economic slowdown concerns and increased monetary policy uncertainty, there is high demand from investors for REIT-related products with stable cash generation capabilities." He added, "Despite recent price adjustments in US-listed REITs, investment demand continues, especially for stocks confirmed to have stable dividend payment capacity. Capital gains expansion is expected with improvements in the real estate sector during future interest rate cut phases, increasing investment attractiveness as a relatively high-income source."

Samsung Active Asset Management recently listed the ‘KoAct Global Climate Tech Infrastructure Active’ ETF. The KoAct Global Climate Tech Infrastructure Active ETF invests in climate tech companies with carbon reduction technologies such as low-carbon energy including wind, solar, and nuclear power, as well as electric vehicles, energy storage systems (ESS), and virtual power plants. It also includes core infrastructure companies related to power infrastructure and renewable energy power plant construction. The portfolio is constructed based on the ‘SolActive Global Climate Tech Infrastructure PR Index’ with additional stocks carefully selected through Samsung Active Asset Management’s research.