Solactive has launched two new indices in the infrastructure space, offering exposure to investable baskets of infrastructure companies from developed markets while screening for high dividend yield and low volatility. The Solactive Global Infrastructure High Income Index and the Solactive Global Infrastructure Income Index may serve as the basis for future investment products including ETFs.
The Solactive Global Infrastructure High Income Index offers increased focus on dividend income by only selecting stocks that are expected to pay a dividend in the next quarter.
Eligible constituents must be listed in a developed market and must be operating in an infrastructure-related FactSet industry such as Air Freight/Couriers, Airlines, Alternative Power Generation, Electric Utilities, Engineering & Construction, Gas Distributors, Integrated Oil, Major Telecommunications, Marine Shipping, Oil & Gas Pipelines, Oil & Gas Production, Railroads, Real Estate Development, Real Estate Investment Trusts, Specialty Telecommunications, Trucking, Water Utilities, or Wireless Telecommunications.
Each constituent must also have a minimum market capitalization of €1 billion and a minimum average daily value traded of at least €5 million over the past three months. The Solactive Global Infrastructure High Income Index offers increased focus on dividend income by only selecting stocks that are expected to pay a dividend in the next quarter.
Companies are then assigned a ranking relative to their dividend yield and historical price volatility compared to other stocks in the selection universe. The 30 stocks with the best overall score are selected for index inclusion and weighted by the inverse of their historical price volatility.
Investing in the infrastructure sector has drawn wide attention in recent months following announcements by several developed countries’ governments of planned increases in infrastructure spending.
In the US, the government has pledged to invest $1 trillion to rebuild the country’s infrastructure while Japan has committed to increase the infrastructure budget to $61bn. Similarly, the Canadian government announced the launch of a 10-year infrastructure investment programme, which will include incremental funding for new infrastructure projects estimated at more than $60bn.
These programmes are likely to be key components driving long-term economic growth in infrastructure-related industries. The newly-launched Solactive global infrastructure indices are positioned to capture the potential momentum that infrastructure companies could develop in the wake of these expansions.
Henning Kahre, Head of Research at Solactive AG commented: “The new Solactive Index provides exposure to rising infrastructure spending globally. We are currently seeing a lot of demand for the infrastructure theme across client groups and for different types of investment products.”
The indices have been licensed to JP Morgan for product creation.
Arnaud Jobert, Co-Head of Investible Indices at JP Morgan, added: “Increased infrastructure spending is a global theme that presents investors with the opportunity to take a long-dated view with defensive positioning, and the Solactive Infrastructure Index Series adds to this by providing low volatility and high dividend selection. While we remain in a low euro interest rates environment, products based on the Solactive Indices will also provide investors with relatively high levels of capital protection.”