With apologies to Bob Dylan, the answer to the world's energy problems may well be blowin' in the wind. Although U.S. investors have ample opportunities to invest in individual stocks in other alternative-energy areas, such as Suntech Power (NYSE: STP ) and First Solar (Nasdaq: FSLR ) for solar energy, many wind-power companies don't list shares on U.S. exchanges.
Investors looking to access the returns of a basket of global wind-energy companies now have the opportunity to invest in wind power with the First Trust ISE Global Wind Energy ETF (NYSE: FAN ) . The fund joins the growing list of alternative-energy investing options, and it might be suitable for investors who want a specialty investment in this space.
- Inception date: June 16, 2008
- Expense ratio: 0.60%
- Net assets: $37 million
The First Trust fund is the most recent addition to the rapidly growing world of alternative-energy investing. Just as ETFs such as the Claymore/MAC Global Solar Energy Index ETF (NYSE: TAN ) follow solar companies, the First Trust wind fund tracks an index of companies that participate in the wind-energy industry. Although the heaviest allocations of the First Trust fund are in non-U.S. stocks, some well-known companies are mixed in, including General Electric (NYSE: GE ) and FPL Group (NYSE: FPL ) .
Companies in the wind energy business can be affected by obsolescence of their technology, falling energy prices, and competition from new market entrants. Since the First Trust fund is focused on one industry, it will be susceptible to the economic, political, and regulatory environment affecting these companies.
Alternative energy is a popular area to invest in, with high energy prices one of the primary factors moving prices in this sector. The American Wind Energy Association estimates that wind energy has grown by an average of 29% between 2003 and 2007, making it one of the world’s fastest-growing energy sources. There are relatively few options for businesses and consumers wanting to reduce their energy costs, and wind power is one of the more efficient and competitive options, so it may have some staying power.
However, as new advancements in alternative energy continue, enthusiasm for wind energy could fade quickly. As a result, an investment in such a narrowly focused fund as First Trust should constitute only a small portion of most investors' portfolios.
You can also look for competitors in the wind ETF arena to arrive shortly. Rival PowerShares recently announced plans to list a competing global wind ETF, the PowerShares Global Wind Energy Portfolio (Nasdaq: PWND ) .
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