By: Catherine Yoshimoto, Senior Index Product Manager
"Follow the yellow brick road” – perhaps the most famous advice ever uttered in movie history, in one of the best loved films ever made. There is a widely held belief that the story of Dorothy Gale and the Wizard of Oz is an allegory of late 19th century America—a period that many think has striking similarities to America today. But whether or not you imagine that the 2016 presidential election equates to the cyclone in the film, the consistent infrastructure theme is surely unmistakable. President Trump has, after all, vowed to invest more in America’s basic infrastructure including roads (although not necessarily with yellow bricks).
Such promises can affect relevant market segments. Even before the November election, interest in infrastructure was gaining ground. In a survey last year, Preqin found that half of institutional investors questioned had a positive outlook for infrastructure investment and indicated their intention to increase long-term allocations to the segment in June 2016. The election of a US president who plans to increase infrastructure spending may influence this interest even more.
For market participants looking to track this segment, FTSE Russell offers an index series with a focus on infrastructure and infrastructure-related companies. Using the FTSE Global Equity Index Series as the starting universe, the FTSE Infrastructure Index Series selects the relevant companies based on FTSE’s definition of infrastructure. There are several types of indexes in this series, each with a slightly different approach to the segment.
Purists may favor the selection criteria applied in the FTSE Core Infrastructure Index Series, which focuses on companies that generate 65% or more of their revenue from owning, managing or operating structures or networks in the energy, telecommunications and transportation sectors. The FTSE Core Infrastructure 50/50 Index Series uses the same universe as the standard Core index series but with a variant weighting methodology that caps exposures to certain infrastructure subsectors. Those that prefer a broader definition of infrastructure may prefer the FTSE Infrastructure Opportunities Index Series, which additionally includes infrastructure-related segments of materials & engineering, conveyance services and communications services.
As we can see above, relative to their relevant, broader based reference indexes (the FTSE Global All Cap Index and the FTSE Developed Index) the Core Infrastructure and Core Infrastructure 50/50 indexes recorded higher returns for 2016.
The increased interest in infrastructure and infrastructure-related segments of the market had already started prior to the election of President Trump, and his vows to increase infrastructure spending may result in further interest. If infrastructure spending does increase, of course, roads will be mended and jobs no doubt created, and maybe more Americans will decide, like Dorothy, that “there’s no place like home.”
Get a more detailed look at the FTSE Infrastructure Index Series.
 Preqin Investor Outlook: Alternative Assets H2 2016.
© 2017 London Stock Exchange Group plc and its applicable group undertakings (the “LSE Group”). The LSE Group includes (1) FTSE International Limited (“FTSE”), (2) Frank Russell Company (“Russell”), (3) FTSE TMX Global Debt Capital Markets Inc. and FTSE TMX Global Debt Capital Markets Limited (together, “FTSE TMX”) and (4) MTSNext Limited (“MTSNext”). All rights reserved.
FTSE Russell® is a trading name of FTSE, Russell, FTSE TMX and MTS Next Limited. “FTSE®”, “Russell®”, “FTSE Russell®” “MTS®”, “FTSE TMX®”, “FTSE4Good®” and “ICB®” and all other trademarks and service marks used herein (whether registered or unregistered) are trade marks and/or service marks owned or licensed by the applicable member of the LSE Group or their respective licensors and are owned, or used under licence, by FTSE, Russell, MTSNext, or FTSE TMX.
All information is provided for information purposes only. Every effort is made to ensure that all information given in this publication is accurate, but no responsibility or liability can be accepted by any member of the LSE Group nor their respective directors, officers, employees, partners or licensors for any errors or for any loss from use of this publication or any of the information or data contained herein.
No member of the LSE Group nor their respective directors, officers, employees, partners or licensors make any claim, prediction, warranty or representation whatsoever, expressly or impliedly, either as to the results to be obtained from the use of the FTSE Russell indexes or the fitness or suitability of the indexes for any particular purpose to which they might be put.
No member of the LSE Group nor their respective directors, officers, employees, partners or licensors provide investment advice and nothing in this communication should be taken as constituting financial or investment advice. No member of the LSE Group nor their respective directors, officers, employees, partners or licensors make any representation regarding the advisability of investing in any asset. A decision to invest in any such asset should not be made in reliance on any information herein. Indexes cannot be invested in directly. Inclusion of an asset in an index is not a recommendation to buy, sell or hold that asset. The general information contained in this publication should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional.
No part of this information may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without prior written permission of the applicable member of the LSE Group. Use and distribution of the LSE Group index data and the use of their data to create financial products require a licence from FTSE, Russell, FTSE TMX, MTSNext and/or their respective licensors.
Past performance is no guarantee of future results. Charts and graphs are provided for illustrative purposes only. Index returns shown may not represent the results of the actual trading of investable assets. Certain returns shown may reflect back-tested performance. All performance presented prior to the index inception date is back-tested performance. Back-tested performance is not actual performance, but is hypothetical. The back-test calculations are based on the same methodology that was in effect when the index was officially launched. However, back- tested data may reflect the application of the index methodology with the benefit of hindsight, and the historic calculations of an index may change from month to month based on revisions to the underlying economic data used in the calculation of the index.