A Concrete Play On Trump's Infrastructure Plan With This ETF

As is the case with most of his initiatives, President Donald Trump's infrastructure plan is controversial. 

Still, Trump's plan to shore up American bridges, highways, roads and other infrastructure items by spending up to $1 trillion was a centerpiece of his 2016 presidential campaign. Predictably, speculation regarding increased infrastructure spending was thought to be a boon for an array of infrastructure exchange traded funds.

The problem is that many legacy infrastructure ETFs are global funds, meaning they are not dedicated to U.S. stocks. That changed with the debut of the Global X U.S. Infrastructure Development ETF PAVE last March. Highlighting its sensitivity to U.S. infrastructure headlines, PAVE hit an all-time high Thursday.

PAVE's Objective

PAVE tracks the INDXX U.S. Infrastructure Development Index and “seeks to invest in companies that stand to benefit from a potential increase in infrastructure activity in the United States, including those involved in the production of raw materials, heavy equipment, engineering, and construction,” said Global X.

In a sign that investors are comfortable betting on Trump's infrastructure efforts, PAVE's assets under management total has swelled to $29.8 million, nearly double the fund's total from the end of the third quarter. Still, investors need to exercise caution with their infrastructure bets.

“According to what has been heard from the White House so far, it appears the effort will focus mostly on deregulation and privatization of America’s infrastructure — not actual construction of new roads and bridges,” reports Newsweek. 

A Better Mousetrap

In addition to having a lack of dedication to U.S. stocks, many legacy infrastructure funds are excessively allocated to energy and utilities names, sectors that are not always responsive to infrastructure scuttlebutt. PAVE has no energy exposure and a token weight to the utilities sector.

Almost two-thirds of the ETF's 89 holdings hail from the industrial sector and 26.5 percent are materials names. PAVE holdings include familiar names such as CSX Corp. CSX, Union Pacific Corp. UNP and Eaton Plc ETN.

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