New Alt Energy, Africa ETFs Disappoint in October

Both alternative energy and Africa represent fertile terrain for investment growth -- or so reasoned some exchange-traded fund managers earlier this year. But new ETFs focusing on those themes have yet to pay off.

The accompanying table of five recently created ETFs targeting the realm of alternative energy and two with investments in Africa and the Middle East shows that the new offerings have yet to break out from the pack during the depressing autumn of 2008.

With more than 800 ETFs now competing for investor attention, new offerings by the industry usually reflect what money managers consider the new "trendy" areas of the investment milieu. As often as not, by the time the investment fashion police identify an area as "the next new thing," the investment trend has peaked and investors find themselves dressed in last year's portfolio trappings.

But this new batch of tony ETFs represents the possibility of longer life spans. Few would quarrel with the reasoning that the alternative energy trend is still in its infancy. Similarly, the Africa/Middle East region is undeniably the least -- and possibly last -- exploited investment region left on earth.

The only fund on the list to outperform the S&P 500 total-return index over the past three months was the iPath Barclays Capital Global Carbon Index Total Return Fund ( GRN), which retreated only 14.45% while the S&P tumbled 23.11%. None of the other funds in the list of seven was able to better the S&P gauge during the October bloodletting.

Possibly the most conventional offering on the table, the iShares S&P Global Nuclear Index Fund ( NUCL), contains established stocks such as McDermott International ( MDR), FPL Group ( DPL) and First Energy ( FE).

Philosophically, NUCL is arguably the antithesis of the iShares S&P Global Clean Energy Industry Fund ( ICLN), the major holdings of which include First Solar ( FSLR), energy-from-waste pioneer Covanta Holdings ( CVA) and Sunpower ( SPWRA).

Of the Africa-Middle-East pair of ETFs on the list, the PowerShares MENA Frontier Countries Fund ( PMNA), with large positions in securities such as Arab Bank and Kuwait Finance, is more heavily invested in the oil-rich Persian Gulf than in the emerging African region.

On the other hand, the Market Vectors Africa Index ETF ( AFK) is invested in large African corporations.

Selected New 'Concept' ETFs
Name (Ticker), TheStreet.com Ratings Grade
Inception Date
Advisor
Investment Concept
Oct. Total Return (%)
3-Month Total Return (%)
First Trust ISE Global Wind Energy Index Fund (FAN), U
6/16/2008
First Trust Advisors
ISE Global Wind Energy Index
-45.17
-57.27
iPath Barclays Capital Gl Carbon Idx Tot Retn (GRN), U
6/24/2008
Barclay's Global
Barclays Capital Global Carbon Index Total Return
-18.91
-14.45
iShares S&P Global Nuclear Index Fd (NUCL), U
6/24/2008
Barclay's Global
The S&P Global Nuclear Energy Index
-19.49
-39.86
iShares S&P Global Clean Energy Ind (ICLN), U
6/24/2008
Barclay's Global
S&P Global Clean Energy Index
-39.73
-55.07
PowerShares Global Wind Energy Port (PWND), U
7/1/2008
Invesco PowerShares
NASDAQ OMX Clean Edge Global Wind Energy Index
-38.10
N/A
PowerShares MENA Frontier Countries (PMNA), U
7/9/2008
Invesco PowerShares
Middle East or African & New Frontier Countries
-21.00
N/A
Market Vectors Africa Index ETF (AFK), U
7/10/2008
Van Eck Associates
Dow Jones Africa Titans 50 Index
-26.07
-40.33
S&P 500 Total Return
-16.78
-23.11
Source: TheStreet.com Ratings (Data as of 9/30/2008)
For more information, check out an explanation of our ratings.

Richard Widows is a senior financial analyst for TheStreet.com Ratings. Prior to joining TheStreet.com, Widows was senior product manager for quantitative analytics at Thomson Financial. After receiving an M.B.A. from Santa Clara University in California, his career included development of investment information systems at data firms, including the Lipper division of Reuters. His international experience includes assignments in the U.K. and East Asia.

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