State ETFs Fall Short

NEW YORK (TheStreet) -- State-focused ETFs are an interesting idea, but the recently launched Texas and Oklahoma funds have fallen short of the mark.

The idea of offering investors a way to profit from differences in state economies, regulations and taxes, is compelling. The Oklahoma Exchange Traded Fund(OOK) and TXF Large Companies ETF(TXF), however, contain large companies that offer little exposure to the economies of the states.

The launch of Texas-focused TXF this week and OOK last week show that, although ETFs have sliced the market thinly, there are still plenty of niches waiting to be filled.

On Wednesday, the TXF Large Companies ETF(TXF) began actively trading. TXF's index is made up of some of the largest companies headquartered in the Lone Star State. The instrument's underlying index, the SPADE Texas Index, boasts big names such as ConocoPhillips(COP), Schlumberger(SLB), and AT&T(T).

In looking at the sector breakdown, it is evident that this fund is a strong play on the oil and gas industry. The firms in these sectors comprise over 63% of the index's holdings. Technology is the next largest industry in the index, accounting for a little less than 9%.

In order to gain access to the SPADE Texas index, firms must meet a number of specific criteria. Besides being headquartered in Texas, companies need to be on the NYSE or the NASDAQ, have a minimum $100 million market valuation, a minimum daily sale price of $5 and be able to maintain liquidity.

OOK can also be considered primarily an energy play. According to the fund's Website, "initially, a large percentage of the Fund's assets may be invested in companies in the energy business." The fund tracks the SPADE Oklahoma Index, which consists of companies that are publicly traded and that have their headquarters or principal place of business in Oklahoma.