The Long-Term Benefits of Expanded Infrastructure Investing

Considering all the headwinds and tailwinds facing the global macroeconomic environment right now, one sector that could be in a particularly interesting position moving forward is infrastructure.

Recently, Brock Campbell, CFA, Head of Global Equity Research and Portfolio Manager at BNY Investments Newton, sat down with Todd Rosenbluth, Head of Research at VettaFi, to discuss this very topic. The two discussed the growing opportunity set in the global infrastructure space, the BNY Mellon Global Infrastructure Income ETF (BKGI) and more.

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Infrastructure Investing: Why Now?

To begin, Rosenbluth asked Campbell why now could be an interesting time for advisors and investors to look at gaining infrastructure exposure. Campbell explained that infrastructure investing has historically been able to provide portfolios with income, along with downside protection, which are two things many investors and advisors are looking to expand upon within their portfolios. Furthermore, Campbell noted that the global space is benefiting from a menagerie of favorable tailwinds.

“Things like artificial intelligence, globalization, reshoring, friend-shoring, nearshoring — whatever you want to call it, Todd. They’re all impacting infrastructure,” Campbell added. “And then things as old as demographic trends. We are on the cusp of a massive demographic change, and we think infrastructure is going to have a big role to play in that.”

BKGI Brings a Broader Approach to Infrastructure Investing

Moving on, Rosenbluth pivoted his focus to BKGI. He asked Campbell about the fund’s strategy and how it stands out from other infrastructure funds in the field.

Campbell explained that BKGI seeks to offer a different take on infrastructure investing in part through a broader opportunity set. He elaborated that many traditional infrastructure strategies focus on three industries: utilities, industrials, and energy.

BKGI differentiates itself from these funds by applying a different definition of what infrastructure companies are. The BNY Investments team uses its own definition of infrastructure to look beyond those three traditional industries.

“We believe that infrastructure are companies that have fixed assets in the ground, are earning rent or cash flow off those assets, and have a great deal of regulatory predictability,” Campbell explained.

This wider opportunity set allows BKGI more bandwidth to tap into momentum from different secular themes, as Campbell noted. These themes include aging demographics, the AI build-out, and more.

How BKGI Fits Into a Portfolio

Looking closer at BKGI, Rosenbluth then asked Campbell how investors should look to fit BKGI into their portfolios. Campbell explained that the fund is generally focused on delivering income along with downside protection.

He elaborated that infrastructure companies as a whole tend to be less sensitive to shifting economic conditions. On paper, these companies tend to offer better performance during economic weakness than other sectors.

Furthermore, Campbell noted that if stagflation does play out, infrastructure companies could be in a better position to perform compared to other stocks. This is because, as Campbell explained, these companies can more easily pass costs on to their consumer base.

“When there’s economic concern or a lower economic cycle, these are resources and consumption that doesn’t change based on how the economy is doing,” Campbell added. “Think of water consumption or your electricity consumption or how much Netflix you are streaming. That doesn’t change during a cyclical downturn, but you still need the pipes delivering those.”