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

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

What Are Smart Beta ETFs?

For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.

Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.

There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.

By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.

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 sponsored by Blackrock. It has amassed assets over $2.72 billion, making it one of the larger ETFs in the Utilities/Infrastructure ETFs. IFRA, 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

When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.

Operating expenses on an annual basis are 0.30% for this ETF, which makes it one of the cheaper products in the space.

It has a 12-month trailing dividend yield of 1.76%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

Representing 42.40% of the portfolio, the fund has heaviest allocation to the Utilities sector; Industrials and Materials round out the top three.

When you look at individual holdings, Middlesex Water (MSEX - Free Report) accounts for about 0.84% of the fund's total assets, followed by Alliant Energy Corp (LNT - Free Report) and Hawaiian Electric Industries Inc (HE - Free Report) .

Its top 10 holdings account for approximately 5.82% of IFRA's total assets under management.

Performance and Risk

Year-to-date, the iShares U.S. Infrastructure ETF has added roughly 16.69% so far, and was up about 26.09% over the last 12 months (as of 09/26/2024). IFRA has traded between $34.58 and $46.89 in this past 52-week period.

The ETF has a beta of 1.02 and standard deviation of 18.43% for the trailing three-year period. With about 164 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 $4.16 billion in assets, Global X U.S. Infrastructure Development ETF has $8.24 billion. IGF has an expense ratio of 0.42% 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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