From the July 2008 issue of Research Magazine • Subscribe!

July 1, 2008

First Trust's Wind ETF

The First Trust ISE Global Wind Energy ETF (FAN) has lifted off and landed on the NYSE Arca.

The newly launched exchange-traded fund (ETF) is linked to the ISE Global Wind Energy Index, which contains 52 holdings. Top holdings include Repower Systems, Vestas Wind Systems, and Gamesa Corp. Tecnologica.

According to the prospectus, the fund's annual expense ratio is 0.60 percent.

The index provides a global benchmark of public companies that are active in the wind energy industry based on analysis of the products and services offered by those companies.

FAN will join a small but growing lineup of alternative energy or power ETFs. Even though the total number of 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.

In late June, Invesco PowerShares Capital Management said it planned to list a global wind energy portfolio on Nasdaq: PowerShares Global Wind Energy Portfolio, ticker PWND.

The PowerShares wind-energy portfolio is based on the NASDAQ OMX Clean Edge Global Wind Energy Index, which includes companies that are primarily manufacturers, developers, distributors, installers and users of energy derived from wind sources. Top holdings, by country, are firms based in Denmark, Germany, Spain and the United States.

Renewable energy uses natural resources like sunlight, wind, rain, tides, and geothermal heat to produce energy. High oil prices, concerns about global climate change, and the U.S. government's growing support of renewable energy through legislation has driven the push to commercialize alternative energy sources.

Currently, around $6 billion in assets is invested in alternative-energy ETFs.

Funds with a broader industry sector approach include the PowerShares WilderHill Clean Energy Portfolio Fund (PBW) and 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 two funds are down 29 percent and 12.5 percent respectively through May 31, 2008.

Other ETFs, which are more aggressive, make sub-sector bets that focus exclusively on a specific niche of alternative energy, like Solar (TAN) or Nuclear Power (NLR). NLR has decreased 16.3 percent through May 31.

---

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

Reprints Discuss this story
This is where the comments go.