New ETF May Be Best Infrastructure Play

With a slew of new exchange traded funds, infrastructure is fast becoming a new asset class. Right on cue, we now have the iShares Emerging Market Infrastructure Index Fund(EMIF Quote), which offers something unique.

The ETF's industry breakdown favors transportation infrastructure (toll roads, sea ports and airports), at 33% of assets; electric utilities, 26%; and energy equipment, 20%. Another prominent group is index funds, specifically the iShares MSCI Malaysia(EWM Quote), iShares MSCI South Korea(EWY Quote) and the iShares MSCI Chile Investable(ECH Quote) ETFs. The three index funds total 9.1% of Emerging Market Infrastructure.

The reason there are other index funds in this index fund has to do with the ETF creation and redemption process. Those three countries don't allow for so-called in-kind transfers, which are what makes ETFs tax-efficient. But iShares says the exposure to those countries is important enough to warrant the country ETFs, but they obviously dilute the effect. If iShares didn't use the index funds, the running of the fund would be more expensive and less tax-efficient. ...