Friday, May 18, 2007

Alternative Energy ETF Paints Market Green

Investor's Business Daily
Alternative Energy ETF Paints Market Green
Thursday May 10, 7:00 pm ET
Jesse Emspak

Alternative energy has come into its own with exchange traded funds.

This week Van Eck Global launched Market Vectors-Global Alternative Energy ETF (NYSE:GEX - News) on the New York Stock Exchange.

The ETF tracks the price and yield performance of the Ardour Global Index (Extra Liquid) . The index, published by Ardour Global Indexes, is designed as a benchmark for the global alternative energy industry.

To get in the index, a company must receive half its revenue from alternative energy or related technologies.

It also has to be in one of five industry groups: alternative energy sources, distributed generation, environmental technologies related to alternative energy, energy efficiency or enabling technologies.

The index includes companies both inside and outside the U.S.

Among the U.S. companies in the index are International Rectifier (NYSE:IRF - News), which makes up 4.61% of assets.

Suntech Power Holdings (NYSE:STP - News) is second at 4.32%.

Bush Administration

Alexander Karsner, assistant secretary for energy efficiency and renewable energy at the Department of Energy, says the introduction of the ETFs is a measure of investor confidence in the sector.

Karsner added that the administration sees an exclusive focus on capping emissions as counterproductive. "You can't depend on one silver bullet," he said.

Instead, the investment in new technologies can be one of several strategies.

Joseph LaCorte, a managing member of S-Network, a New York-based consulting firm specializing in the development of indexes, says the index is designed to avoid being too expansive in its definition of alternative energy companies.

Other ETFs

"You could have GE in there, as they run one of the biggest solar panel plants in the world," LaCorte said. "But I don't think they get a lot of revenue from that."

S-Network was one of the firms that developed the index for Ardour.

Ardour, in turn, went to Van Eck Global because of the firm's background in hard assets.

The firm offers four other ETFs: Environmental Services ETF (AMEX:EVX - News), Gold Miners ETF (AMEX:GDX - News), Russia ETF (NYSE:RSX - News) and Steel ETF (AMEX:SLX - News).

Adam Phillips, director of ETF sales at Van Eck, says the Russia ETF tends to track a lot of energy and heavy industry stocks.

The ETFs were all rolled out over the past year. The Russia ETF was the most recent; it started trading April 30. The ETFs represented a total of $671.9 million at the end of March.

LaCorte says there are no immediate plans for more ETFs in the near future, and there are none in registration with the Securities and Exchange Commission.

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