I have had my eye on an ETF that is finally coming to the market, the

PowerShares Emerging Market Infrastructure Portfolio


, which tracks the S-Network Emerging Infrastructure Builders Index.

There are plenty of emerging market funds. One reason they are so popular is the ascendancy aspect to the countries in which the companies are doing business. A fund that focuses on infrastructure in emerging markets would seem to isolate the ascendancy aspect in a manner that

iShares MSCI Emerging Markets ETF

(EEM) - Get iShares MSCI Emerging Markets ETF Report

does not. EEM has a 19% weighting in financial stocks.

PXR is not a pure-play emerging market fund. There is some developed market exposure. The focus is companies participating in the build-up and build-out of infrastructure projects around the world. Estimates for spending on needed projects encompass a wide range, but, suffice it to say, trillions of dollars will be spent in the next 10 to 15 years.

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The sector breakdown is simple: 49.5% materials, 48 industrials and 2.5% utilities. Materials includes a lot of mining stocks like


(RIO) - Get Rio Tinto plc Sponsored ADR Report


Norilsk Nickel


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, which dig the needed resources out of the ground, and even companies like Taiwan Cement, whose role in infrastructure building is obvious.

The industrial stocks in the fund include engineers such as


(ABB) - Get ABB Ltd. Sponsored ADR Report

and equipment makers like Caterpillar. These companies design and build all of the bridges, toll roads and sewer systems that infrastructure is all about.

The country weightings favor China, 15%, Russia, 11.4%, Brazil, 10.9%, and the U.S., 8.6%. I would also note that India makes up 5.6%. With the BRIC countries comprising 42.8% of the fund, there is a lot of overlap with BRIC ETFs. And quite a few of the broad-based emerging market funds like EEM.

The fund does not expose holders to undue single-stock risk. There are 66 names in all, with no stock being greater than 5%. PXR will have a 0.75% expense ratio. The literature I saw said the average P/E ratio was 4.30. I would take that with a grain of salt as earnings estimates appear to be headed lower with the global slowdown.

As mentioned, PXR excludes most sectors, most notably financials but also consumer and more pure-energy plays. This creates visibility for more volatility than broad-based emerging market funds as borne out in the fund's back test.

More specifically, PXR should be more cyclical than EEM. The money on infrastructure desperately needs to be spent but there is a global slowdown, which potentially impedes implementation of new projects and possibly stops others from being completed.

Recently in an interview on CNBC Asia, Marc Faber said he thinks the freeze-up in the front end of the yield curve could prevent mining companies from satisfying short-term liquidity needs, causing at least one company to fail. While he may or may not be right about that, it does underscore the cyclical nature of a prominent group of stocks in PXR.

The longer-term opportunity exists if you believe the ascendancy theme, which is the catalyst for infrastructure spending, has long-term viability. If you believe it does, you must also believe that demand for materials has long-term viability. Throughout the emerging market run this decade, materials stocks have offered some of the strongest performance, which seems likely to resume once the bear market and economic slowdown phase begins to transition to the next expansion.

As a reminder, this fund might be a better long-term solution for emerging markets but it will certainly be more volatile.

Emerging Infrastructure Builders vs Major Indexes

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At the time of publication, Vale was a client holding. 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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