First Trust NASDAQ Clean Edge Smart Grid Infrastructure Index Fund (NYSEARCA:GRID)
This fund offers exposure across the grid and electric energy infrastructure sector. For a slightly more ‘active’ choice in the infrastructure world, investors should consider GRID for quality exposure.
It looks to have an enhanced exposure on the NASDAQ OMX Clean Edge Smart Grid Infrastructure Index. Though it is an unpopular choice with AUM of less than $20 million, there are some features in the ETF which makes it a distinguished play in the broader utility ETF space.
GRID has as much as 66% exposure in industrials followed by technology (17%) and utilities (15%), setting it apart from utility or industrial pure plays. Reduced focus on utilities makes the fund less susceptible to rising rate risk. From style and capitalization perspectives, GRID is well diversified. Small, mid and large caps account for almost equal share of the portfolio.
Unlike pure utilities that are normally prone to value stocks, GRID puts a decent level of capital on the growth stocks (by about 40%). However, a cautious stance is also well represented in the portfolio with about 37% focus in value stocks and 23% share dedicated to blend stocks.
There is a twist in the geographic division as well. The U.S. accounts for more than half of the portfolio while international stocks comprise the rest, with Europe making up 45% of the portfolio followed by Asia-Pacific (4%).
With Europe on the growth path, though rather slow, the fund is likely to get some impetus from this regional exposure. Also, interest rates in Europe are at the rock bottom level with no possibility of increases in the near term. This will also do good to the rate-sensitive slices of the fund.
GRID consists of 38 stocks. The fund has little bit of concentration risk with the top five holdings accounting for more than 8.0%. Red Electrica Corporacion S.A. (8.40%), Quanta Services, Inc. (8.39%) and Schneider Electric S.A. (8.19%) round out the top three holdings of the fund (read:Deutsche Bank Launches Muni Bond, Utility ETFs).
For this unique exposure, the fund charges 70 basis points in annual fees which is slightly costly in the utility ETF space. The fund gained about 7.22% in the YTD time frame in contrast to 12.32% gain seen in the biggest fund in the space – XLU and SPY’s advancement of 1.36%. We currently give GRID a Zacks ETF Rank of 2 or ‘Buy’ rating along with a medium risk outlook.
Overall, the global economy is picking up. While the pace is not same across the board, the dark era of recession is over. As a result, infrastructural spending should see a lift from now. Moreover, be it safety or be it risk whatever be the market sentiment, GRID’s uniqueness in portfolio composition should earn it some decent returns and possibly a place in your portfolio too.
This article is brought to you courtesy of Eric Dutram.