Offense & Defense: The Infrastructure ETF Playbook

• Even amid this uncertain macroeconomic environment, infrastructure stocks have emerged as a potent solution for defending against inflation while capitalizing on domestic supply chain and AI spending.
• Infrastructure investing offers potent flexibility: two of the most popular infrastructure ETFs,  the BNY Mellon Global Infrastructure Income ETF (BKGI A-) and the Global X US Infrastructure Development ETF (PAVE B), employ widely different approaches to tackle different portfolio goals, sector allocations, and more.
• The differences within these ETFs showcase the flexible benefits that the infrastructure sector offers as a whole, both as a defensive play and a vehicle for long-term growth.

Considering where the macroeconomic environment currently finds itself, infrastructure is actually offering an increasingly potent value proposition. This is due to three factors: a more divided world, the threat of inflation, and the opportunities within AI adoption. In a more fragmented world, supply chains and energy routes are becoming increasingly divided. Naturally, this is leading many countries to ramp up their domestic infrastructure spending, which is an easy boon for the sector. On the inflation front, infrastructure stocks have a historically potent place in portfolios as a defensive buffer against inflationary pressures. This is because infrastructure companies tend to have an easier time passing on cost increases to consumers. As an offensive factor, the AI boom is working out very well for infrastructure companies. AI adoption requires tremendous energy, and many countries and companies are investing in stronger electrical grids to support this. These investments are working as a powerful long-term tailwind for the infrastructure sector.

Fortunately, advisors and investors have plenty of different ways of tackling the opportunities within infrastructure companies through the ETF wrapper. To elaborate, there are a multitude of ETFs that offer different takes on infrastructure investing, giving folks the ability to pick a strategy that best suits their portfolio objectives. See More: ETF Spotlight: How BKGI Redefines Infrastructure Investing For instance, take a look at two of the more widely-used infrastructure ETFs: the BNY Mellon Global Infrastructure Income ETF (BKGI A-) and the Global X US Infrastructure Development ETF (PAVE B). Both funds may offer infrastructure exposure, but they do so in dramatically different ways. Furthermore, these differences go far beyond simple differences between passive and active management. To start, let’s take a look at BKGI. This fund from BNY Investments looks to provide income and total return through a portfolio of dividend-paying global infrastructure stocks. Meanwhile, PAVE focuses on capital appreciation in lieu of income. Additionally, the fund has a domestic lens, investing in companies based within the United States. The differences don’t stop there. While PAVE focuses on more traditional infrastructure companies—in part due to its index-based approach—BKGI’s philosophy includes allocations to non-traditional infrastructure stocks. This includes companies in the communications services, health care, and real estate sectors. As one would expect, this means BKGI offers more sector diversification than PAVE does. While PAVE’s portfolio leans heavily into industrials and materials, BKGI’s top sectors are utilities, energy, and real estate. These significant differences showcase why both of these funds have attracted distinct investor bases. PAVE and BKGI each have their own compelling use cases, and advisors and investors who are interested in amplifying exposure to this sector can do their own research to figure out what kind of infrastructure fund best fits their needs.