Why should advisors and investors consider adding exposure to infrastructure companies in their portfolios? Furthermore, what does a global perspective on infrastructure exposure bring to a portfolio?

In early October, Matt Camuso, Head of ETF Solutions and Investment Strategists at BNY Investments, and Brock Campbell, CFA, Head of Global Equity Research and Portfolio Manager at BNY Investments Newton, discussed these questions and more during the VettaFi webcast Building the Future: The Case for Infrastructure as a Secular Investment Theme. The webcast was moderated by Roxanna Islam, CFA, CAIA, Head of Sector & Industry Research at VettaFi.

How BKGI Approaches Global Infrastructure

Early on in the webcast, Islam turned to Campbell. She asked him how BNY Investments approaches gaining exposure to infrastructure companies on a global scale. In particular, she cited the BNY Mellon Global Infrastructure Income ETF (BKGI), seeking an overview of the fund’s strategy.

Campbell noted that BKGI’s target is to deliver a 6% gross dividend yield with the added benefit of capital appreciation. Inherently, this strategy tends to have a defensive tilt due to the asset class it invests in.

One way that BKGI stands out is its approach to traditional versus non-traditional infrastructure companies. When traditional advisors and investors think of infrastructure companies, they tend to picture utilities, airports, pipelines, and similar projects. The fund’s portfolio team, as Campbell notes, looks outside the box. There, they find other companies that are also part of the infrastructure framework that other infrastructure funds may miss out on.

“When we launched the fund, we actually started incorporating other things that were commonly bucketed as non-traditional or social infrastructure: exciting things like telecommunications, senior housing, hospitals, REITs,” Campbell added. “By taking that more holistic or broader view of infrastructure, we were able to build a universe north of 500 securities.”

A Unique Take on Infrastructure

From there, Islam then turned to Camuso and asked him how BKGI differentiates itself from other infrastructure ETFs on the market. Among other factors, Camuso noted that BKGI stands out from the crowd through its active approach. Many of the other infrastructure ETFs on the market are passively managed. Advisors and investors can lean on BKGI for its flexibility and the advantages of active stock picking.

Furthermore, Camuso added that BKGI’s global strategy can give it a stronger opportunity set over other funds that just focus on U.S. infrastructure. As Camuso pointed out, BKGI has been able to take advantage of the tailwind from advisors and investors seeking more international portfolio exposure this year.

Lastly, Camuso noted that BKGI can stand out from its peers through its time-tested strategy. As he pointed out, the fund has a longer track record than many other infrastructure funds on the market.

“We were one of the first to market, and we’re the largest by AUM by a long shot,” Camuso added. “But this strategy, even though it came to market in November of 2022, we do have a track record that goes back to 2011. And that’s another key differentiator for us.”

Why Infrastructure Matters

Turning back to Campbell, Islam noted that macroeconomic conditions and fiscal policy trends are making many clients reconsider their portfolio allocations. As such, why should they consider adding infrastructure exposure into their portfolios right now?

Campbell noted that BKGI’s goal of 6%¹ gross yield could be very attractive for advisors and investors who are looking to amplify their income but are worried about what comes next. Furthermore, infrastructure is inherently a defensive sector, and can provide downside protection during potential moments of economic volatility.

“There is some concern about where equity levels are today, and there is some concern around the labor market today, and I would say this asset class does do quite well in periods of economic uncertainty relative to equities, also in periods of declining interest rates,” Campbell added. “If you believe that’s the environment we’re heading into, then historically it has done quite well. So, what we’ve seen is a lot of investors look at it for those types of characteristics when investing in the infrastructure space.”

Campbell and Camuso discussed far more on the webcast. They broke down BKGI’s stock selection process, portfolio applications, infrastructure correlations, and more. To register for the webcast replay, click here.

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1 The fund targets, but does not guarantee, an annualized gross forward-looking 12-month yield of 6% or more for its portfolio (the “targeted yield”). Targeted yield represents the forward-looking yield of the fund’s portfolio securities in the aggregate over the next 12 months, calculated before fund fees, expenses, and taxes, and does not represent the amount of distribution payable to fund shareholders. The targeted yield is based on the dividend yield of the securities in the portfolio.