Exclusive Infrastructure Fund Traces the Emerging Markets

Many exchange-traded funds (ETFs) offer exposure to infrastructure around the world. But with the iShares Emerging Markets Infrastructure ETF (EMIF), you gain specific access to a small portfolio that includes 30 of the biggest publicly listed emerging market companies in the world.

There is no set-in-stone definition of what constitutes an infrastructure company, though it typically includes those involved with roads, bridges, public facilities and physical systems that are fundamental to a developed economy. Traditionally, this sector has shown less volatility than other stocks over the long run and tends to have higher yields than many other assets.

EMIF is different from your average infrastructure fund in two ways. First, the fund excludes telecommunications firms entirely, which is a big deal since many of the biggest infrastructure companies in China and Taiwan are telecom companies. Second, EMIF is focused on a narrower geographic scope. It concentrates its exposure in countries such as Brazil and China and excludes the Middle East entirely. This focus gives the fund the benefit of not having to deal with the volatility in the Middle East.

The fund has a yield of 4.17% and a middling-to-high expense ratio of 0.75%. Its return over the last year reached 10.90% but came up short of the 12% return of the S&P 500 during the same time period. The graph below shows that EMIF is trading at a price at $28.58. Zacks Investment expects the fund to trade up to $31.66 per unit, or around 12.5%, within the next 12 months. This projected jump is speculative, of course, and much depends on the upcoming events in the new year.

EMIF’s top five holdings are Ultrapar Participacoes SA ADR, 10.85%; Airports of Thailand PLC DR, 7.42%; Korea Electric Power Corp ADR, 7.26%; CCR SA, 6.83%; and Tenaga Nasional Bhd., 6.28%. EMIF invests 43% of its funds in industrials, 36% in utilities and 20% in energy. EMIF can be used as a good way to round out an investor’s portfolio in emerging markets, which typically involve high-risk holdings.

If you wish to hedge out some of the volatility in the emerging markets, I encourage you to consider iShares Emerging Markets Infrastructure ETF (EMIF) for your portfolio.

As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an email. You just may see your question answered in a future ETF Talk.