ETF Battles: GRID vs. DTCR- Infrastructure Investment Smackdown!

We keep hearing the word infrastructure. That word now means two very different things. On one end, there's the physical backbone of the modern economy, the smart grid, which includes electrification and the hardware that keeps power on. On the other hand, there's the digital backbone, the data centers, the cloud infrastructures, and the REITs and the hardware firms powering AI and the internet.

Today's ETF battle is a head-to-head contest between two ETFs right in the thick of both trends. So, which is the better choice? Stick around for the answer.

You're watching ETF Battles and I'm Ronda Ley. Great to see you again. Welcome to a brand new year for ETF Battles, an original series which kicks off season 7. Can you believe it? We've been doing this program for seven years, and I'm so thankful to all of our viewers, our judges, our sponsors, and everybody who makes this show possible. Thank you, thank you, thank you.

Be sure to join our community by hitting the subscribe button and send me your ETF battle request in the comment section below. We'll consider it for our upcoming matchup on the next episode. Jumpstart your financial future with a smarter, safer, and robust strategy. Be sure to enroll in our ETF guide, free online courses. Whether you're looking to enhance your trading skills, improve the safety of your portfolio, or planning for retirement, we got you covered. All courses are available totally free to all of our viewers. Just hit the enrollment link in the description section below.

For today's ETF contest, we got one from a viewer named Rue Burger, and it's a good one. It's between Grid from First Trust and DTCR from Global X. Which ETF is the better play on this massive AI digital infrastructure buildout? Thank you, Rue Berger, for today's ETF contest.

Judging today's matchup, we've got a duo extraordinaire, time-tested veterans, David Derkin, an independent ETF analyst and outside contributor at the Mly Fool, and Shaina Sisle with Banrian Capital. Judges, great to see both of you. Welcome back.

Happy New Year, Ron. It's great to be back. Yeah, great to see you guys again. So, our four battle categories are cost, exposure, strategy, performance, and mystery. For mystery, that's where you, our judges, can choose any factor or criterion that you think is crucial to today's contest. You can also nominate wild card ETFs if you feel there's better choices elsewhere. I've got the scorekeeping chores, and at the end of the program, we will declare an overall winner. Keep in mind, none of the battle outcomes are ever predetermined or known in advance by myself or our judges.

So the first category is costs and we're going to start with you Shaina. Please get us started.

So this is really interesting. Both ETFs have reasonable expense ratios. DTCR at 50 basis points and Grid at 56. Grid actually trades a little better than DTCR. The spread is slightly better, but not so much that it makes up for the six extra basis points of expense ratio. Although it is a substantially larger fund with more holdings which suggests to me potentially better liquidity and trading volume.

So this was a really hard one for me. On the surface if you just look at the numbers DTCR is the winner. But when you look about average daily trading volume and just ease of trading, grid is a bit better. So, I consider this a tie if I'm being honest. There's not one that I think is substantially better on an expense ratio and trading basis. They both have their pros and cons.

Solid start. Thank you, Shaina. Dave, you're up next. How do you see it when it comes to cost?

I came to pretty much the same conclusion. Expense ratios, neither one of them is particularly low. They're not terribly high either. They're just sort of in the middle, but they're close enough that I don't think there's a material difference with either one. And like Shaina said, I like the liquidity of grid a little bit, too. That should keep trading spreads down, but you look at that whole picture combined on the total cost of ownership, it it's kind of a tossup. I agree. So, I'll call it a split decision as well.

Well, that takes us to our next category, exposure strategy. Dave, you're still up, so break it down for us.

Yeah, even though these both fall under the infrastructure category, you've got two really different portfolios here on grid. You've got mostly industrials and utilities. So, you've got the companies that are producing the hardware, the meters, the networks, and things like that. So, you got a little bit more of a cycl, cyclally sensitive portfolio on DTCR. You've got about half tech and half REITs, data center REITs. So, you've got all the big names there, American Tower and Crown Castle. So, all the big familiar names.

So I think when it comes down to it, you really have to decide kind of which angle you want to play here. Personally, I like grid a little more. It's cap weighted but it does focus more on pure plays within the infrastructure space. It's got dedicates about 80% of its portfolio to companies that generate more than half of their revenue from from this. So I think you probably get a little more of a pure play. I kind of like that focusing on the industrial and and the manufacturing side of things. Although I think it really comes down to kind of which which angle you you want to tackle in order to get your infrastructure exposure. For me personally, I'm going to call Grid the winner. That's just my personal preference.

Shaina, you're up next. How do you see it when it comes to exposure strategy?

Yeah, I agree with Dave. These are two really different funds giving you exposure to very different things. I was kind of surprised with DTCR having such a huge chunk of it and REITs. I expect it to have a a better yield than it does. I'd hoped that it'd have a better yield considering the read exposure, but it it doesn't. They basically have the same yield.

It really does come down to personal preference. I actually am going to take the opposite view of Dave on this. Well, I think that the need for the type of infrastructure improvements and buildout that grid is exposed to is higher. I just don't think that is the place where the dollars are flowing. So, I am inclined to prefer DTCR's exposure where I think there's a lot of focus, a lot of money going into that space. Most of the largest players in the major indices are playing in the space where there's the need for this. So the actual funds to allocate to the development of this infrastructure is much more robust and not as reliant on government spending where I think grid is much more reliant on government contributions to that buildout.

So, while both of them are excellent funds and as Dave pointed out, grid is probably more of a pure play, I think just ultimately where the trends are and where the money is and where the flows are going, I think that DTCR is the exposure that I would want. And my only caveat being is that I wish it had had a better yield profile considering its read exposure.

Well, that takes us next to performance. So, how do these two funds compare? Shaina, you're up.

Well, this gets back to what I was saying, where the funds are, where the money's going. DTCR absolutely blows grid out of the water performance-wise with the sole exception being the five-year number, which makes sense to me because if you go back five years, the focus on data center and AI just didn't exist. And there was a much larger focus on the grid and you know, you had the Texas grid failures and things of that nature. they were hot topics at the time, but they kind of came and went. Whereas the broader themes and the money and the flows and truly the infrastructure buildouts happening more in the digital data center and digital infrastructure side and you clearly see that in performance it's not even close for these two funds in the last 18 months or so. Even the three-year DTCR outperforms it's just the fiveyear where there's a differential.

But overall I think the trends support GTCR so it is my winner. I will note that in these types of thematic areas active management tends to do well. So I really wanted to try to find a wild card. But what I found was it's not really an area where there's a lot of assets. So, while there's quite a few active managers in the space that have substantially better performance than either one of these and a more robust underlying universe, meaning that you gain exposures to all kinds of different clean energy and data center development and things of that nature, the vast majority of the actively managed funds with the broader universes have very small asset bases. Fact, when I was doing my my screen to see what kind of came up, the ones that were coming up at the top were all being delisted because they were not attracting assets, which I found very interesting. So, as much as I tried to find a good wild card for this because I do think that active management does better in themes in these thematic plays, I was unable to really identify one. So, ultimately, DTCR is my winner. Even though the active managers I did find did have better performance, they just don't have asset base, so they can't be sustained.

Thank you very much for those excellent notes and points. Dave, you're up next. How do you see it when it comes to performance?

Yeah, which like Shaina said, it depends on kind of what your time frame is you're looking at to see who's outperforming who, whether you prefer short-term performance or long-term performance, you can, you know, you can get a different answer. I agree with the yield problem on DTCR. I mean, for a portfolio that's half reads, I agree. I'd like to see something closer to 4%.