Real estate is also difficult to capture. During the financial crisis, REITs offered no diversification benefits. I have not had real estate exposure for clients since late 2007, but for investors who believe in the asset class, the WisdomTree International Real Estate ETF (DRW) offers a mix of property operators and owners in real-estate markets that are less mature than ours. These less-mature markets have a better chance of capturing a cyclical upswing than do U.S. REITs.
In the past few years, most investors have come to learn a lot more about commodities than they previously knew. El-Erian advocates 11% in commodities, which is more than I prefer. Being true to El-Erian's portfolio, I would allocate 6% to SPDR Gold Trust (GLD) and 5% to PowerShares Agriculture Portfolio (DBA). I am not a fan of the broader commodity funds because of their exposure to crude oil.
Infrastructure is a compelling theme, and there are several ETFs in existence. The truest ETF exposure might be the iShares S&P Global Infrastructure Fund (IGF) because it is heavy in industrial companies that will build roads, airports and the like.Thus far, the portfolio takes no single-stock risk, but that is not ideal for building a diversified portfolio. There are plenty of examples of foreign stocks that stand to be important to the building up and out of infrastructure in emerging markets. China Railway and Construction (CWYCY) would seem to have its finger on the pulse of all things infrastructure in China including railroads, highways, commuter rails, airports and hydroelectricity. A combination of IGF and a stock like CWYCY could be an effective way to capture the effect El-Erian is looking for. Special opportunities can be anything you understand and are willing to pay close attention to. Some examples of this could include small emerging market countries. I just wrote an article on the GlobalX Colombia ETF (GXG). There will be more ETFs that focus on small countries in the future. One special opportunity now is volatility. A couple of weeks ago, iPath listed the S&P 500 VIX Short Term Futures ETN (VXX). VXX is not the VIX, but it is close. Something like water via the PowerShares Water Portfolio (PHO) could be another example. The bigger context is recognizing how we get the return our financial plans require may be changing, and we need to change with it. PBP, ADRE, GLD, IGF, DBA