No, you are not experiencing deja vu. Yet another infrastructure-related exchange-traded fund has been listed. As its name implies, the First Trust ISE Global Engineering and Construction Index Fund ( FLM) tracks an index maintained by the International Securities Exchange, or ISE.

The index targets all the types of infrastructure project you would expect, such as "utilities, transportation, telecommunications, commercial, residential and commerce facilities." The specific companies included in FLM's portfolio perform the "engineering, designing, planning, consulting, project managing and/or constructing of these projects."

Similar to the PowerShares Emerging Market Infrastructure Portfolio ( PXR), FLM will be very cyclical, and the types of projects underlying the revenue streams of the component holdings will rely on funding being available for projects.

Infrastructure is important on two levels. Emerging markets looking to build first-generation infrastructure create demand as do established countries like the U.S., whose infrastructure is in desperate need of updating. All told, such infrastructure costs could run into the trillions of dollars. There is no debate as to whether this is needed, but the near-term availability of funding is in question. It makes sense to expect that in terms of the big picture it could be a while before the fund lives up to the back-test results from 2004-06.

FLM is a global fund; the U.S. is the portfolio's largest country weight at 24.49%, followed by Japan at 21.57% and then several countries from Western Europe with mid-single-digit weightings. The fund does a good job at minimizing single-stock risk. The largest holding is Vinci SA from France, with only a 3.11% weight in the fund. FLM will have a 0.70% expense ratio.

The sector weightings show the extent to which infrastructure can be a multifaceted theme. FLM is 94% industrial stocks. For comparison, SPDR FTSE/Macquarie Global 100 ETF ( GII) is 89% utilities and PXR, profiled last week, is 49% materials. Carrying the potential sector diversification out a little further, if there were a pure-play ETF of publicly traded stock and futures exchanges, it could be considered a financial infrastructure fund.

As if the almost vertical decline in the index this year weren't clear enough, the back-test statistics belie how volatile FLM could be. It has had a beta of 1.61 vs. 1.00 for the Russell 3000 Index and a standard deviation of 23.71 vs. 11.72 for that same index. Obviously, those stats give an idea at to why the outperformance was so great during the bull market and why the ensuing decline was almost as swift.

FLM: A Back Test
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The fund's future results hinge on two different things. First is the clear and obvious need to spend money on infrastructure. Even if the U.S.' economic problems are secular, for most of the world the current slowdown is likely to be cyclical, and so the money will be spent sooner or later.

The other side of the coin for FLM is its country-weighting. Most of the fund allocates to the U.S., Japan and Western Europe; that's roughly 75% of the fund. The visibility for these regions over the next five years is murky at best. So will companies like Obayashi from Japan or Bouygues ( EN) from France be able to swim upstream if those countries are struggling economically and the stock markets continue to struggle? So far, actually, they have been able to hold in reasonably well, but down 10% in a down-40% world could be difficult to maintain.
At the time of publication, Nusbaum had no positions in stocks mentioned, 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; click here to send him an email.