Japan's unfolding nuclear predicament has hammered some narrowly targeted exchange-traded funds, but not always the ones investors might think.
ETFs, typically index mutual funds that trade throughout the day like stocks, are known for letting investors take narrow bets on the market.
IndexUniverse.com tracks more than 30 different funds tied to "energy." But different reactions to the crisis in Japan shows how art, as much as science, goes into the ways these funds are designed.
The $260 million Market Vectors Uranium+Nuclear Energy ETF was down roughly 21% for the week that ended Wednesday. But others have gained, like the $26 million PowerShares Global Wind Energy ETF, which was up 4%. One possible reason is that investors see problems with Japan's nuclear plants as a positive sign for other energy alternatives.
(Market Vectors says its fund is acting as expected, given the circumstances.)
The largest, most popular energy ETF, the $10 billion Energy Select Sector SPDR, fell 6% in the week that ended Wednesday, but not necessarily for the same reason as the nuclear fund.
As it happens, the Select Sector SPDR tracks just energy stocks in the Standard & Poor's 500. It's dominated by fossil fuel giants like Exxon Mobil Corp. and Chevron Corp.
Only two of the 23 stocks in the Market Vectors nuclear fund are in the S&P 500 at all, Constellation Energy Group Inc. and Exelon Corp.
Standard & Poor's classifies them both as utilities rather than energy stocks.
Most of the other holdings in the Market Vectors fund are foreign stocks — many are Canadian, Australian or Japanese — excluding them from the U.S.-focused S&P 500.
Other possibilities, such as USEC Inc., with a market value of roughly $550 million, and US Ecology Inc., with a value of $300 million, are apparently too small for the large-cap index.
