Satrix Global Infrastructure ETF
Investors can potentially benefit from the Satrix Global Infrastructure ETF as part of the alternative (listed) asset class within their ETF portfolios. The ETF, which includes companies that derive at least 65.0% of revenue from transport, telecommunications and energy infrastructure and related activities, can augment ETF portfolio diversification.
Global asset manager VanEck, which provides a similar ETF in Australia, estimates that the correlation coefficient between global listed infrastructure returns and global equity returns was 0.48 – this implies that there was potential co-movement in returns between the two asset classes less than half the time (May 2011- April 2021) which bodes well from a portfolio perspective.
One of the companies included in the ETF is energy utility NextEra Energy, which stands to benefit from the recently signed Inflation Reduction Act (IRA) in the US. According to S&P Global, the IRA contains nearly $370bn in federal spending geared toward decarbonisation. In its Q2 2022 results, NextEra Energy Resources (renewables segment) reported adding approximately 2,035 megawatts (MW) of renewable energy to its backlog. Part of the investment made by NextEra Energy Resources since its Q1 2022 financial results was the addition of 1,200MW of solar projects, making this the second largest quarter of solar origination in NextEra Energy Resources’ history.
We believe that this renewable energy investment is in line with the International Energy Agency’s expectations of a more than 8.0% increase in global renewable energy capacity in 2022, reaching almost 320 gigawatts (1GW=1,000MW) – this bodes well for the Satrix Global Infrastructure ETF. Fund description: The Satrix Global Infrastructure Feeder ETF tracks the performance of the FTSE Global Core Infrastructure Index by investing in the iShares Global Infrastructure UCITS ETF. The underlying iShares ETF distributes income on a quarterly basis. Therefore, the Satrix Global Infrastructure Feeder ETF will distribute all income received on the same basis.
Fund suitability
- This ETF is suitable for investors seeking thematic exposure to listed infrastructure investment abroad. Also, we think that the fund may be most useful as part of an overall ETF portfolio, given its high-risk rating.
Fees
- The fund has a total expense ratio of 0.80%.
Top holdings
NextEra Energy accounted for 6.2% of the ETF. In addition, utilities (52.1%), industrials (23.3%) and energy (12.0%) make up the top three sectors of the fund.
Satrix Global Infrastructure ETF (JSE:STXIFR)
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Background: Exchange-traded funds (ETFs)
Exchange-traded funds (ETFs) are passively managed investment funds that track the performance of a basket of pre-determined assets. They are traded the same way as shares and the main difference is that whereas one share gives exposure to one company, an ETF gives exposure to numerous companies in a single transaction. ETFs can be traded through your broker in the same way as shares, say, on the EasyEquities platform. In addition, they qualify for the tax-free savings account, where both capital and income gains accumulate tax free.
Benefits of ETFs
- Gain instant exposure to various underlying shares or bonds in one transaction
- They diversify risk because a single ETF holds various shares
- They are cost-effective
- They are liquid – it is usually easy to find a buyer or seller and they trade just like shares
- High transparency through daily published index constituents
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