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Stock Strategist

Thematic ETF Shortcomings: A Mighty Wind?

These funds should live up to their nomenclature.

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I've been getting a lot of user feedback regarding several alternative-energy and infrastructure-related funds, and it's easy to see why. Several of these themes, such as wind and solar power, or the highly anticipated global infrastructure build-out over the next decade, have intriguing merits. What irks me, though, is the insistence of the representative ETFs issued over the past year that have large allocations of utility investments.

Take the two wind ETFs that have surfaced over the past two months: First Trust Global Wind Energy (FAN) and PowerShares Global Wind Energy (PWND). Let me start by saying that both of these funds give investors significant exposure to the biggest names in wind power equipment producers, a feat that is not easily accomplished by U.S. investors because most of these firms are based in Europe and lack American depository receipt (ADR) issuances.

Paul Justice does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.