One issue, and an overlooked one at that, new exchange-traded funds face is timing. As in, sometimes a new ETF comes to market with a valid concept but in the months immediately following its debut, the climate just is not right for that investment thesis.
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While investors will ultimately decide its fate, it is unlikely the Global X U.S. Infrastructure Development ETF (BATS: PAVE) will be viewed as ill-timed. Quite the contrary. Amid widespread anticipation of infrastructure largess from the Trump administration, PAVE could prove to be one of the better-timed new ETFs to come along in some time.
The Time Is Ripe For Infrastructure
After all, while he was campaigning last year, President Donald Trump pledged to spend $1 trillion shoring up U.S. bridges, highways, railroads and other infrastructure items. The United States needs it. Considering this is the world's largest economy, infrastructure here is poor. Without significant improvements in the coming years, could cost the economy trillions of dollars and scores of lost jobs.
PAVE, which debuted Wednesday, follows the INDXX U.S. Infrastructure Development Index, which includes construction companies, heavy machinery manufacturers, engineering firms and raw materials makers.
"Many economists believe that increases in public or private spending on infrastructure development can significantly boost economic growth. According to research from S&P, a 1 percent increase in U.S. infrastructure spending as a percentage of GDP translates to a 1.7 percent increase in GDP over the next three years, or a 70 percent return on investment," according to Global X.
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Things To Consider When Considering PAVE
There are some important points regarding PAVE and its potential going forward. First, the ETF, unlike many established infrastructure ETFs, is entirely devoted to U.S. companies. Second, PAVE is heavily allocated to industrial and materials stocks, sensible allocations for an infrastructure fund, but many of PAVE's older rivals focus more on the energy and utilities sectors.
By themselves, U.S. airports highlight the need for infrastructure improvements and PAVE's potential for investors going forward.
As Benzinga previously reported, the American Society of Civil Engineering (ASCE) released its 2017 report on the health of the nations airport infrastructure, and the results arent pretty. Despite the fact that more than two million passengers rely on domestic airline travel each day, the ASCE gave the nations airports a grade of D in terms of their condition.
PAVE holds 88 stocks and charges 0.47 percent per year, or $47 on a $10,000 investment.
2017 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.