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.
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.