From the June 2008 issue of Research Magazine • Subscribe!

Plugging into New Energy

It's hard not to pick up a magazine or turn on the cable network with out hearing or reading a story about the green energy movement.

The smart money still seems to be flooding into alternative energy investments too.

According to a recent Ernst & Young report using data from Dow Jones VentureOne, $571.6 million of venture capital was invested in 34 clean technology companies during the first quarter of 2008. A significant portion of investment was focused on alternative fuels ($178 million), energy/electricity generation ($148.3 million), and energy efficiency ($116.4 million).

Alternative Energy ETFsEven though the total number of exchange-traded funds (ETFs) that invest in alternative energy strategies has jumped to 15 from just two over the past few years, the universe is still very small.

Currently, $5.84 billion in assets is invested in alternative energy ETFs.

The four ETF families that offer alternative energy investments are Claymore Securities, InvescoPowersShares, First Trust Advisors, and Van Eck Global.

The range of investment strategies are a broader industry sector approach, with ETFs like PowerShares WilderHill Clean Energy Portfolio Fund (PBW) or PowerShares WilderHill Progressive Energy Portfolio Fund (PUW). Each of these funds cover a range of emerging technologies like biofuels, wind power, hydroelectricity, geothermal power and solar energy.

The other strategy, which is more aggressive, is to make sub-sector bets that focus exclusively on a specific niche of alternative energy, like Solar (TAN) or Nuclear Power (NLR).

Top performing areas so far this year include the PowerShares Global Nuclear Energy (PKN) ahead by 10.5 percent, the Claymore MAC/Global Solar Energy (TAN) up 9.3 percent, and the PowerShares Progressive Energy(PUW) advancing 2.1 percent.

Alternative energy ETFs generally charge annual expenses between 0.60 to 0.75 percent.

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Ron DeLegge is the San Diego-based editor of www.etfguide.com.

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