Building the future
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    Building the future

    Jamie Hannah, Deputy Head of Investments & Capital Markets
    08 November 2020
    The COVID-19 pandemic has pushed most developed nations into recession and without government-driven programs designed to boost economic activity, it will be difficult to recover. 

    Governments’ monetary policies and control of interest rates are running thin. Rates are at all-time lows and there has been huge swathes of cheap money. Without government fiscal policy changes and deep investment into local economies, many countries will struggle to recover. 

    Infrastructure projects are seen as a way to boost economic growth and many countries around the world are now looking to invest in this area. The USA is looking to pass a bill after the election to invest $1.5 trillion into highways, transit, rail and broadband. China has budgeted for trillions of yuan worth of infrastructure covering 5G rollout, data centres, railways and water projects. The US and China are not alone in this spending and many other countries around the world are also increasing infrastructure spend. 

    Even before COVID-19 plunged the world into financial turmoil a 2017 McKinsey Global Institute report estimated $5.5 trillion was needed to facilitate growth in expanding economies and to replace existing aging infrastructure. The latest McKinsey report looks at how, with falling income in the current environment and governments already spending big on social programs, these much needed infrastructure investments will be funded. The report identified developer contributions, tax increment financing, and land development managed by infrastructure providers, among others.

    This will mean more contracts for existing infrastructure companies, new projects for investment and therefore increased potential for profit in the infrastructure space. As governments announce new projects, existing companies will be in a great position to tender for work. There is no doubt that this is great news for infrastructure worldwide.

    The VanEck Vectors FTSE Global Infrastructure (Hedged) ETF (ASX code: IFRA) tracks the FTSE Developed Core Infrastructure 50/50 Hedged into Australian Dollars Index, the widely regarded market benchmark for the sector. IFRA includes companies that own and operate the networks and foundations for modern society to function, including transport, energy, water, communications and social services. IFRA is $A hedged, which reduces the impact of fluctuations in the Australian dollar on any income generated offshore.

    Issued by VanEck Investments Limited ACN 146 596 116 AFSL 416755 (‘VanEck’). This is general advice only, not personal financial advice. It does not take into account any person’s individual objectives, financial situation or needs. Read the PDS and speak with a financial adviser to determine if the fund is appropriate for your circumstances.

    The PDS is available here, and details the key risks. No member of the VanEck group of companies guarantees the repayment of capital, the payment of income, performance, or any particular rate of return from the fund.
    An investment in IFRA carries risks associated with: financial markets generally, individual company management, industry sectors, ASX trading time differences, foreign currency, currency hedging, country or sector concentration, political, regulatory and tax risks, fund operations, liquidity and tracking an index. See the PDS for details.

    IFRA is not in any way sponsored, endorsed, sold or promoted by FTSE International Limited or the London Stock Exchange Group companies (‘LSEG’) (together the ‘Licensor Parties’) and none of the Licensor Parties makes any claim, prediction, warranty or representation whatsoever, expressly or impliedly, either as to (i) the results to be obtained from the use of the FTSE Developed Core Infrastructure 50/50 Hedged into Australian Dollars Index (with net dividends reinvested) (‘Index’) upon which the Fund is based, (ii) the figure at which the Index is said to stand at any particular time on any particular day or otherwise, or (iii) the suitability of the Index for the purpose to which it is being put in connection with the Fund. None of the Licensor Parties have provided or will provide any financial or investment advice or recommendation in relation to the Index to VanEck or to its clients. The Index is calculated by FTSE or its agent. None of the Licensor Parties shall be (a) liable (whether in negligence or otherwise) to any person for any error in the Index or (b) under any obligation to advise any person of any error therein. All rights in the Index vest in FTSE. “FTSE®” is a trademark of LSEG and is used by FTSE and VanEck under licence.