This ETF invests in companies that are active in the development,
ownership, lease, or management of infrastructure assets. It is a
capitalization-weighted, passive portfolio that tracks the Dow Jones
Brookfield Global Infrastructure North America Listed Index. The ETF is
focused on North American holdings, with two-thirds invested in the U.S.,
25% in Canada, 6% in the U.K., and the balance in Mexico and Brazil. From a
sector perspective, utilities and energy make up more than 82% of the
As of Sept. 5, top holdings included
Enbridge Inc. (TSX: ENB),
American Tower Corp. (NYSE: AMT),
National Grid Plc (NYSE: NGG),
TransCanada Corp. (TSX: TRP), and
Crown Castle International REIT (NYSE: CCI).
Short-term performance of the fund has lagged its actively-managed peers,
with the fund gaining 4.6% for the year ending July 31. In comparison,
actively-managed infrastructure mutual funds are outperforming
significantly. For example, the
Renaissance Global Infrastructure Fund, the largest infrastructure mutual fund, is up 6.5% in
the period, while other infrastructure funds range between 1.1% and 13.9%.
In the longer term, however, the advantage shifts to the lower-cost ETF,
which posted a five-year average annual compounded rate of return of 13.7%,
compared with 11.1% for the Renaissance offering, with other funds’ returns
ranging between 5.0% and 13.5% in the same period. Volatility has also been
higher, but the excess return has more than compensated.
Valuations look stretched compared with the broader equity market, but very
much in line with its actively managed peers. The price-earnings ratio was
quoted at 28.9 at recent prices. The S&P/TSX Composite Index trades
around 16 times earnings, while the MSCI World Index trades at 19.5 times.
Factoring in modest growth projections, the valuation levels still appear
to be stretched, but are on the lower end of the other infrastructure
Costs are reasonable, with an MER of 0.55%. In comparison, an actively
managed infrastructure mutual fund will carry an MER of between 1.4% and
1.7% in a fee-based version. Clearly, the ETF offers a considerable cost
Infrastructure is one of those specialized areas of the market where a
high-quality, active manager should be able to outperform, because of
potential inefficiencies. Unfortunately, to date, the mutual fund options
have largely disappointed over the long-term, making this a solid choice
for those looking for infrastructure exposure in their portfolios.
BMO Global Infrastructure Index ETF
BMO Asset Management Inc.
FundGrade A+ Award:
2012, 2013, 2016
Large Cap Blend
BMO Asset Management Inc.
Dave Paterson, CFA, is the Director of Research, Investment Funds for
D.A. Paterson & Associates Inc., a consulting firm specializing in providing research and due
diligence on a variety of investment products. He is also the publisher
Dave Paterson’s Top Funds Report,
offering regular commentary and in-depth analysis of Canada’s top
investment funds. He uses a unique analytical approach to identify
funds with strong, risk-adjusted returns, and regularly publishes his
insights and analyses in Fund Library.
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only and is not intended as personalized investment advice.