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Emerging Markets Infrastructure ETFs Square Off

by Michael Johnston on June 22, 2009 | ETFs Mentioned: EMIF • PXR

iShares added yet another ETF to its market-leading family of funds on Friday, launching the S&P Emerging Markets Infrastructure Index Fund (EMIF). EMIF will compete with PowerShares‘ Emerging Markets Infrastructure Portfolio (PXR), an ETF that began trading in October 2008 and has grown to a market capitalization of more than $46 million. PXR, along with many other emerging markets ETFs, has been very popular among investors in recent months, rising more than 35% year-to-date. Now that iShares has launched a fund that could compete with the existing PowerShares ETF for future investor dollars, here’s a side-by-side breakdown of how these two stack up:

Country Coverage: China, Brazil, and Argentina will comprise more than 55% of EMIF’s holdings, while PXR is significantly more diversified. China, Indonesia, and Russia receive the largest allocations in the PowerShares fund, accounting for just under 35% of total holdings. Although China is the largest component of PXR, EMIF has more than double the China exposure. PXR affords much more weighting to Indonesia, Russia, and South Africa.

EMIF Holds a Heavy China Position

Number of Holdings: EMIF limits itself to 30 holdings, and currently has only 25 stocks. PXR is slightly more diversified, holding 60 individual securities.

Methodologies: EMIF tracks the S&P Emerging Markets Infrastructure Index, which targets concentration across three distinct clusters of the infrastructure industry: transportation (20% of holdings), energy (40%), and utilities (40%). PXR tracks the S-Network Emerging Infrastructure Builders Index, which invests more evenly in seven unique sectors: construction and engineering, construction machinery, construction materials, diversified metals and mining, heavy electrical equipment, industrial machinery, and steel.

Expense Ratios: Both EMIF and PXR check in with expense ratios of 0.75%.

The Verdict: While these funds sound like direct competitors, upon further review they’re actually more different than alike. Investors bullish on China or emerging markets utilities and energy sectors may find EMIF to be an appealing play. Those seeking more diversified exposure, in terms of both countries and infrastructure subsectors, may be better served PXR.