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You are here: Home / Dividend Shares / Listed Infrastructure Fund – VBLD vs IFRA

Listed Infrastructure Fund – VBLD vs IFRA

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Infrastructure investments are commonly characterized as a defensive asset class and known for their stable cash flows. The asset class can be attractive for income-focused investors looking for a stream of consistent, in some cases passive income.

Investors commonly seek out infrastructure style assets through unlisted investment vehicles. It is the most cost and management efficient and easiest way to gain diversified exposure to the asset class.

Securing these assets can be highly competitive, especially in the current low-interest environment. The amount of minimum investment required typically means it is usually the realm of institutional investors. It can be difficult for retail investors to invest in infrastructure assets or infrastructure funds directly.

What are Infrastructure Assets?

Infrastructure assets in our eyes, are natural monopolies where users have limited or no alternatives. We have highlighted the main types of infrastructure assets which come to mind.

1. Toll Roads – road networks that charge users to use the asset.

2. Oil and Gas Pipelines – pipeline networks which charge a toll for the oil and gas producers for the transition of the commodity through the pipeline

3. Energy Utility Assets – energy assets with returns regulated by the government.

  • Generators
  • Renewable Energy Projects (Solar and Wind Plants)
  • Energy Distribution Assets

4. Airport – Airports are the ultimate monopolies as it provides the only air route into and out of a city.

5. Telecommunication network – These types of assets include fiber networks, either overland or undersea cables that are privately owned. Another form of telecommunication network includes mobile towers.

6. Rail networks – given the age and state of rail technology, the existing rail networks have become entrenched into the transport fiber and are not bulit anymore.

7. Water utilities – water utility covers distribution networks and the like and are some of society’s most essential infrastructure assets.

There are some common characteristics across these funds. Most of the asset earnings are driven long terms contracts (with fixed or CPI increases). The owners have a high level of income protection where it can pay consistent dividends and, like the dividend stocks increase the rate out dividend payout overtime.

Replicate Infrastructure Fund Returns

We think investors can use blue chip shares in the infrastructure sector as a proxy to replicate the return profile of infrastructure funds. In this approach, investors can get pretty good exposure to the sector on a market basis by investing an ETF that owns a portfolio of infrastructure shares. And since this is investing via ETF, this bypasses some of the company specific risks by owning infrastructure shares.

Vanguard Global Infrastructure Index ETF – VBLD Dividend Yield

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VBLD tracks the FTSE Developed Core Infrastructure Index, including more than 130 listed infrastructure companies in developed markets. The type of shares in the index is widely diversified across multiple infrastructure sectors. The advantage of owning VBLD is it is a low cost infrastructure fund like investment where Vanguard’s management fee is only 0.47% per annum.

There are options for investors to invest in infrastructure shares directly but what is unique about VBLD is that it is one of the only listed infrastructure fund investment options on the ASX.

VanEck Vectors FTSE Global Infrastructure (Hedged) ETF – IFRA Dividend Yield

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IFRA invest in infrastructure securities in the developed markets. The fund holds more than 130 stocks with the main difference to VBLD being greater exposure to Australia.

VBLD Dividend History

The companies in VBLD are more mature companies with an average market cap of more than $40 billion. The fund itself passthrough the dividends received from the underlying companies and pay dividends quarterly.

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IFRA Dividend History

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Filed Under: Dividend Shares

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