NEW YORK (TheStreet) -- Exchange-traded funds are designed to hold bundles of securities, but investors still need to know what their funds hold. Case in point: BP (BP) - Get Report.

The battered energy producer has spent $2 billion trying to address a massive oil spill in the Gulf of Mexico. Its shares have plunged 47% since the spill began on April 20. The stock figures prominent in many energy ETFs.

BP has a 4.4% weighting in the

iShares S&P Global Energy Sector Index Fund

(IXC) - Get Report

, a 5.2% weighting in the

WisdomTree International Energy Sector Fund

(DKA)

and an 8.3% weighting in the

SPDR S&P International Energy Sector ETF

(IPW)

. The company also has a 7% weighting in the

iShares MSCI United Kingdom Index Fund

(EWU) - Get Report

. As large as these positions seem, they were double-digit weightings before the Deepwater Horizon oil leak crushed its shares.

BP's pain has dragged down the funds that hold the stock. In the past two months, WisdomTree International Energy has lost 14%, SPDR S&P International Energy has dropped 15% and the domestic

Energy Select SPDR ETF

(XLE) - Get Report

has fallen 6.2%. The stock decline hit the funds hardest during the first week after the leak began. As the weightings shrank, the stock affected the funds less.

Looking forward, the SPDR International Energy stands to gain if BP rebounds from the fallout of its decision to suspend its dividend. The fund has an 8% weighting. Conversely it will suffer the most if the worst case scenario plays out and the company goes out of business. While going to zero is a remote possibility, going down a lot from here is possible.

The potential drag caused by a stock with a 15% to 20% weighting in an ETF can be meaningful. The WisdomTree fund was scheduled to have BP removed from it on June 18. This fund is dividend weighted and so a stock that no longer pays dividend is no longer eligible to remain in the fund. Because the iShares and SPDR funds are market-cap weighted, BP is likely to remain in those funds.

There are many narrower ETFs with huge weightings in one or two stocks. The Energy Select SPDR ETF mentioned above has 18% in

Exxon Mobil

(XOM) - Get Report

and 13% in

Chevron

(CVX) - Get Report

. If a disaster were to occur at an Exxon or Chevron site, the Energy Select Sector SPDR will be the one to lag the other energy sector ETFs.

Some other popular funds with this problem include the

iShares Dow Jones U.S. Telecom Sector Fund

(IYZ) - Get Report

, with 18% in

AT&T

(T) - Get Report

and 13% in

Verizon

(VZ) - Get Report

. The

PowerShares QQQ

(QQQQ)

has 15% in

Apple

(AAPL) - Get Report

and the

iShares MSCI All Peru Capped Index Fund

(EPU) - Get Report

has 17% in

Compania De Minas Buenaventura

(BVN) - Get Report

, 14% in

Southern Copper

(SCCO) - Get Report

and 13% in

Credicorp

(BAP) - Get Report

13%.

This is not a reason to avoid ETFs but a reminder to understand the risks of any fund you own, including composition or methodology risk. Despite the concentration in the Peru fund it has less single-stock risk than buying a single stock.

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At the time of publication, Nusbaum had positions in DKA, VZ and IXC, although positions may change at any time.

Roger Nusbaum is a portfolio manager with Your Source Financial of Phoenix, and the author of Random Roger's Big Picture Blog. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Nusbaum appreciates your feedback;

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