Top ETFs for global infrastructure

In emerging markets, infrastructure is being developed at a breathtaking rate, while some infrastructure in the developed world (especially in the U.S.) requires substantial repair.

Here, we examine two ETFs that attempt to isolate investment opportunities in emerging and developed markets infrastructure, respectively.

Their performances this year have diverged tremendously, highlighting unique features of their composition.

PowerShares Emerging Markets Infrastructure (PXR) invests in more than 80 stocks in a variety of industries, con- centrating primarily on those domiciled in emerging markets.
PXR is oriented toward the builders of infrastructure and companies that supply them with resources and equipment.

PXR tends to perform well when expectations for growth are strong and suffers when investors worry about global recession.

PXR did very well in 2009 and 2010, generating total return over those two years of 135%, but it has flopped in 2011, dropping 35% through Sep. 30.

To be included, companies must have significant sales or operations in emerging markets. All of the major emerging markets are represented in PXR�s portfolio. US-based stocks make up just 4%.

Unlike PXR, iShares S&P Global Infrastructure (IGF) is focused primarily on companies that use and maintain infrastructure.

It combines relatively steady performers in the utilities and energy-transport sectors with more economically sensitive companies that oversee a variety of infrastructure functions.

About 40% of the portfolio is devoted to the largest utilities in developed markets. About 22% of the portfolio is given to energy-related companies, mostly pipeline and energy transport companies. �

The balance of IGF�s portfolio (about 38%) is given to an assortment of companies that iShares classifies as �industrial� companies. U.S. companies make up about 27% of IGF�s portfolio.

IGF has held up well under recent market pressure, owing largely to its allocation to utilities. The ETF is down 7.5% so far in 2011 (through Sep. 30), vs. a 15.4% loss for the MSCI All-Country World Index.