Vanguard Australia has launched the Vanguard Global Infrastructure Index ETF (VBLD AU) on Australian Securities Exchange.
VBLD provides exposure to developed market stocks from firms operating in three ‘core’ infrastructure sectors.
The ETF provides low-cost access to developed market securities operating across the three ‘core’ infrastructure sectors: transportation, energy and telecommunications.
Chief among the benefits of owning infrastructure assets is the potential for long-term, steady cash flows, often partly protected from inflation.
The high intrinsic value and long life of infrastructure assets can also be a good match for the long-term liabilities of institutional investors such as pension funds.
Investors also cite the diversification benefits of including infrastructure in a portfolio, as returns tend to show reduced correlation with other assets. Returns are also relatively uncorrelated with the economic cycle due to the essential nature of the services many infrastructure assets provide.
Infrastructure assets also typically operate in markets that have high barriers to entry due to regulation or high costs, making competition less likely and profit margins healthier.
The underlying reference for the fund is the FTSE Developed Core Infrastructure Index. Index provider FTSE Russell uses the Industry Classification Benchmark to identify infrastructure stocks from the parent FTSE Global All Cap Index.
For companies to be included in the index, at least 65% of their revenue must be derived from the development, ownership, operation, management and/or maintenance of infrastructure from within the transportation, energy and telecommunications sectors. Constituents are then weighted by investable market capitalization.
The ETF comes with a management fee of 0.47%. Dividends from the fund are distributed to investors on a quarterly schedule.
Robin Bowerman, Head of Corporate Affairs at Vanguard Australia, said the ETF would “allow investors to construct investment portfolios that are truly diversified across and within asset classes, and suited to their individual goals.”
The new fund has two main competitors on ASX, ETFs from ETF Securities and AMP Capital.
The ETFS Global Core Infrastructure ETF (CORE AU) tracks the Solactive Global Core Infrastructure Low Volatility Index which provides exposure to the 75 lowest volatility infrastructure equities listed globally with constituents weighted by the inverse of their volatility. CORE has approximately A$4.0 million in assets and management fees of 0.45%. The actively managed AMP Capital Global Infrastructure Securities ETF (GLIN AU), meanwhile, has assets under management of A$23m and a management fee of 0.94%.