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The NASDAQ OMX Group has launched a new exchange traded fund (ETF). Called the First Trust NASDAQ(R) Clean Edge Smart Grid Infrastructure Index Fund (Nasdaq: GRID). Based on their Smart Grid Infrastructure Index (QGRD), the ETF is managed by First Trust Advisors and listed on NASDAQ.
QGRD is a market capitalization index that includes companies whose chief concern is the U.S. electric grid. This includes software development, network, hardware and metering companies, as well as others pushing towards more intelligent power distribution.
Of course, some companies are bigger than others. With companies like General Electric included along with substantially smaller startup groups, the index wouldn’t mean much without some method of weighting things. Without that, you’d have an index of the few giants in the group. But they give pure-play components (companies that only work on a part of the smart grid, unlike GE which also builds locomotives) a collective 80 percent weighting while more diverse companies get a 20 percent weighting.
Pure play companies have to get over 50 percent of their revenue from infrastructure work to qualify and companies with a market cap under $100 million do not qualify. Average daily trading volume must be $500,000 per day. This helps to ensure that the index’s value is representing the economy of the smart grid as accurately as possible.
The ETF works like a share of stock; it is based on the performance of the index as a whole and can be bought or sold during the trading day. Similar to a mutual fund, its value is representative of the aggregate value of the companies involved.
So far, the fund has risen 0.63 percent to 30.34 from 30.66 at the trading day’s open. It has ranged from 30.24 to 30.76 in the last few hours. Nothing dramatic yet, though it is encouraging that the stock hasn’t plummeted along with our hopes and dreams. Expect a long term rise with a few snags — business as usual.
NASDAQ OMX Executive VP John Jacobs told CNN Money “First Trust has filled the need for an investment product based on an index that has brought sharper focus to an industry that is transforming our nation’s energy grid.”
It also indicates a growing recognition of the many unique financial opportunities brought by the modernization of U.S. power infrastructure. From startups to multinationals like GE or IBM, the revamping of the grid is creating substantial financial activity at a time the economy needs it.
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