Making its debut on 06/13/2007, smart beta exchange traded fund Invesco Global Clean Energy ETF (PBD) provides investors broad exposure to the Alternative Energy ETFs category of the market.
What Are Smart Beta ETFs?
The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies–popularly known as smart beta.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
Even though this space provides many choices to investors–think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting–not all have been able to deliver first-rate results.
Fund Sponsor & Index
The fund is sponsored by Invesco. It has amassed assets over $215.09 million, making it one of the average sized ETFs in the Alternative Energy ETFs. This particular fund seeks to match the performance of the WilderHill New Energy Global Innovation Index before fees and expenses.
The WilderHill New Energy Global Innovation Index is comprised of companies engaged in the business of the advancement of cleaner energy and conservation.
Cost & Other Expenses
Investors should also pay attention to an ETF’s expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.
Operating expenses on an annual basis are 0.75% for PBD, making it one of the most expensive products in the space.
The fund has a 12-month trailing dividend yield of 1.58%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
When you look at individual holdings, Stem Inc (STEM) accounts for about 1.48% of the fund’s total assets, followed by First Solar Inc (FSLR) and Plug Power Inc (PLUG).
The top 10 holdings account for about 3.95% of total assets under management.
Performance and Risk
The ETF has lost about -27.92% so far this year and is down about -26.20% in the last one year (as of 12/19/2022). In the past 52-week period, it has traded between $17.65 and $27.40.
The ETF has a beta of 1.27 and standard deviation of 37.75% for the trailing three-year period, making it a high risk choice in the space. With about 138 holdings, it effectively diversifies company-specific risk.
Alternatives
Invesco Global Clean Energy ETF is a reasonable option for investors seeking to outperform the Alternative Energy ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
IShares ESG Aware MSCI EAFE ETF (ESGD) tracks MSCI EAFE ESG Focus Index and the iShares ESG Aware MSCI USA ETF (ESGU) tracks MSCI USA ESG Focus Index. IShares ESG Aware MSCI EAFE ETF has $6.68 billion in assets, iShares ESG Aware MSCI USA ETF has $19.69 billion. ESGD has an expense ratio of 0.20% and ESGU charges 0.15%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Alternative Energy ETFs.
Bottom Line
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit
Zacks ETF Center
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