The article makes no mention of what it would cost yo to try on this Infrastructure strategy for size. The article does mention that the first global infrastructure EFT that tracks the Macquarie Global Infrastructure 100 Index was introduced in early 2007. Aparently, there was no low cost way to invest in this new asset class during the five to fifteen year back-testing period that provides the data in the article.(So much for an investment time machine, even if you had one). Incidentally, it also turns out that this new ETF is offered by State Street Global Advisors, the employer of the author this Journal of Indexes article.
Since the article calls this EFT, "low-cost access to the space" but does not bother to mention the cost, The Skilled Investor looked it up on the SSGA site. The annual Gross Expense Ratio is .6% per year. If your reference point is the outrageous expense ratios of actively managed mutual funds, then this might be considered "low-cost." On the other hand, if your reference point is very low-cost broad market index funds with a.1% annual expense ratio, then the pleasure of taking this active bet on the future of the Infrastructure asset class is going to cost you one-half percent of your assets each and every year.
So the promise is that this new Infrastructure asset class will get you higher returns and lower portfolio risk in the future, using backward looking numbers. The article tells you that a 10% allocation to this new Infrastructure category would have added 1.3% annual return to the five year return from the beginning of 2002 to the end of 2006. Not a branburner, but a handsome increase. How likely is this to be repeated? No one knows.
Have Macquarie Bank and State Street Global Advisors discovered a rich new vein of investment gold to mine for years?" Will individual injvestors get any of it? Is this another goldmine for individual investors or is this another selective reading of market history for naive performance chasing individual investors?
Is this just more active industry sector rotation in disguise? If so, how long will Infrastructure's hot streak run, before the cycle wanes? A year? Several years? Has the hot streak is already played out?
You decide. Me, I'm sticking with the very boring, low cost, broad market, passive index strategy. Costs less. Gets the market return -- whatever that will be. Takes far less time. And, history has shown this passive, low cost index strategy for indivudal investory to be superior from a risk-adjusted net returns standpoint.
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