In this ASX ETF research update, I take a quick look at the ETF Securities Global Core Infrastructure ETF (ASX: CORE).
You can view the complete list of ASX ETFs on the BEST ETFs Australia website.
The Infrastructure Market Is Growing…
The thought of investing in infrastructure sounds boring compared to some of the high-tech options available to investors, such as artificial intelligence or machine learning. However, infrastructure is a sector that has a lot of potential to provide sustainable, long-term growth.
A study from Oxford Economics found that between 2006 and 2040, global infrastructure spending is projected to be $79 trillion. Further, the same study predicted that for global infrastructure needs to be met, spending between 2006 and 2040 will actually need to be $94 trillion, which means increasing the proportion of global GDP spent on infrastructure from 3% to 3.5%.
Infrastructure is a huge industry, and it is central to social and economic growth. With a growing population and increasing urbanisation, the need for energy, telecommunications, transport, and water will be continually growing.
It is particularly important to take a global approach to infrastructure investing because much of the growth will come from developing and emerging economies.
Review: ETF Securities CORE Infrastructure ETF
The ETF Securities (or ETFS) Global Core Infrastructure ETF currently invests in 76 companies and aims to track the performance of the Solactive Global Core Infrastructure Low Volatility Index.
Shares included in the ETF are weighted inversely based on the volatility of each company, meaning the least volatile companies receive the highest weighting inside the CORE ETF.
Looking inside the ETF you’ll find that around 42.9% of CORE is allocated to shares of utilities companies, 28.5% to communication services, 25.5% to industrials and 3% to energy.
CORE invests in companies from all over the world, although just over 40% of the companies are based in the US or Canada. There are companies from Europe and Asia, as well as some high-quality Australian companies like Transurban Group (ASX: TCL) and Aurizon Holdings Ltd (ASX: AZJ).
The CORE ETF has been operating since September 2017, and in its first two years, it has returned 14.72% per year. Over the last 12 months, CORE is up 19.01%.
CORE ETFs Fees And Risks
The management costs or ‘MER’ for CORE are 0.45% per year, which is towards the high-end of what you would typically want to pay for an index-tracking ETF. One key risk is that this ETF only has a market capitalisation of around $17 million. Generally, a larger ETF is preferable because it means the ETF’s provider receives more management fees and the fund may be more sustainable.
I would consider this ETF a high-risk investment. Despite the high weightings to low-volatility companies and the growth prospects for infrastructure, the energy and utility sectors can be very cyclical and often depend on the movement of commodity prices.
All things considered, I would say the CORE ETF might be worth looking at for a small, tactical position, but it should be treated as high-risk.
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Disclosure: At the time of writing, Max does not own shares in any of the companies mentioned.