Two Infrastructure ETFs, Two Outcomes

When investing in infrastructure started to become popular, certain exchange traded funds held the promise of lower volatility and correlation to the broader market.

Two of these were the Macquarie Infrastructure Company(MIC Quote) and Brookfield Infrastructure Partners(BIP Quote) ETFs. I wrote about each in this capacity and turned out to be wrong on both accounts.

Macquarie Infrastructure simply blew up. Macquarie, an Australian investment bank known down under as the millionaire factory, made quite a business for itself by setting up similar funds around the world. Management's philosophy was to do a lot of transactions between funds or with other entities, and these required debt financing, so when the debt markets started to cease up, the funds imploded. The U.S. fund has dropped 90% in the past year and a half, and a similar Macquarie fund listed in Australia is down 60%.

Brookfield Infrastructure Partners has fared much better, though it didn't avoid the bear market. It tracked very closely to the S&P 500 Index. When I first wrote about Brookfield, it owned electrical transmission in Canada and Chile, and timberland in the Pacific Northwest. It was on the lookout for investments in airports and toll roads, among other types of infrastructure projects. While it hasn't invested in those yet, managers have put money in what the company calls "social infrastructure," which for now means a large stake in an Australian hospital, a U.K. hospital and a 50% interest in the Royal Melbourne Showgrounds, a 46-acre complex that includes office complexes and "exhibition space."