NEW YORK ( TheStreet) -- Infrastructure has been a burgeoning theme in the last few years, spawning numerous exchange traded funds looking to capitalize on plans to expand and modernize highways and transportation systems in emerging markets. While several ETFs target infrastructure, they usually have distinct strategies that can generate wildly different results. That means investors have to look more closely at the funds' holdings before they buy. Last month, I attended the MoneyShow convention in San Francisco. The event is geared toward individual investors and traders. While interest in ETFs was high at the convention, I found that investors paid little attention to the funds' underlying holdings. The differences among infrastructure funds illustrates what can happen if you don't do your due diligence. Among two of the popular funds, the PowerShares Emerging Markets Infrastructure Portfolio ( PXR) has returned 39% this year, while the SPDR FTSE/Macquarie Global Infrastructure 100 ETF ( GII) has fallen 7%. That's because industrial stocks make up 51% of the PowerShares fund, with another 45% going toward materials. One of its big holdings is Vale ( VALE), a Brazilian mining company. About 37% of the fund is invested in China, Russia and Brazil. However, the fund can own stocks from developed markets that draw revenue from emerging markets, such as Caterpillar ( CAT) in the U.S. and ABB ( ABB) of Switzerland. In contrast, utility stocks make up 89% of the SPDR ETF. The fund also invests more heavily in developed countries with the U.S. accounting for 38% of its assets, followed by 11% in Germany and 9% in both Japan and France.
Both funds provide exposure to infrastructure, but target different parts of the theme. As markets were falling early in the bear market, the SPDR fund (utilities) held up better than the PowerShares fund, which has outperformed in recent months. This situation isn't uncommon among ETFs that focus on individual countries or industries. For example, the iShares MSCI Brazil Index Fund ( EWZ) and the Market Vectors Brazil Small-Cap ETF ( BRF) offer exposure to the South American nation, but the Market Vectors fund invests heavily in small, consumer discretionary stocks. That strategy has helped it gain 22% in the past three months. The iShares fund, which buys large companies and natural resources stocks, has advanced 1% during that period. In the case of the infrastructure ETFs, one isn't better than the other. They can both play important roles in any diversified portfolio. However, it's important to understand that the SPDR ETF acts more like a global utility fund. In fact, its performance correlates more closely with that of the iShares S&P Global Utilities ETF ( JXI) than the PowerShares fund, according to the SPDR Correlation Tracker Tool. The PowerShares fund correlates more closely with the iShares S&P Global Materials ETF ( MXI). Anyone who bought the SPDR FTSE/Macquarie Global Infrastructure 100 ETF thinking it would outperform the market, probably didn't understand the fund. They probably never looked at what the fund owned. Too many people make this mistake. -- Reported by Roger Nusbaum. Follow TheStreet.com on Twitter and become a fan on Facebook.