Cleantech ETF: Part Infrastructure, Part Green, Part Mid-Cap Growth

I had barely mentioned the PowerShares CleanTech Fund (PZD). I wrote a single sentence in a single previous post. That's it.

Nevertheless, Rafael Coven, managing partner of Cleantech Indices LLC, expressed dismay regarding my "comments" (plural). The egregious error? I described the ETF as having "green characteristics."

Never mind the fact that I merely pointed to a a high correlation between the price movement of the Market Vectors Environmental Services Fund (EVX) and the PowerShares Cleantech Fund. Forget the fact that Coven himself compares his offspring to the Winslow Green Growth Fund (WGGFX), the Clean Edge Fund (QCLN) and the Global Clean Energy ETF (PBD).

Well... it must be as they say. You can't please all of the people all of the time.

The irony, of course, is that I am quite fond of the PowerShares Cleantech Fund. Regardless of whether one characterizes the fund as "greenish" or not, there are a variety of unique attributes worthy of description.

Invesco Powershares describes "cleantech" companies as those that derive the majority of their business from products or services that improve productivity or performance while reducing costs, resource consumption, pollution and toxicity. Expressed another way, these are knowledge-intensive corporations that add economic value (productivity, performance, etc.) while minimizing the use of the world's natural resources.

Why might one wish to invest in a group of companies with these traits? An obvious reason is the soaring demand for natural resources. A less-obvious-reason? Companies are being targeted worldwide for the ways in which they impact the environment. It follows that multinationals are hiring and will continue to hire "cleantech" firms to help them "clean up" their act.

There's more. One of the greatest trends in the 21st century may involve infrastructure improvement; specifically, countries need to turn on electricity, build roads, establish communication networks, deliver drinking water as well as maintain sewage systems. And, countries need to do this in a more environmentally friendly way than they have in the past. (Read my previous commentary on funds like the iShares Infrastructure Fund.)

That's where the PowerShares Cleantech Fund comes to the foreground. Since the companies in the index come from all segments of the economy, PZD may not be as narrow as green funds or infrastructure funds like iShares Infrastructure (IGF). Yet that doesn't mean that PZD won't travel a very similar path.

Fund provider Powershares explains that PZD is primarily weighted in the industrial sector... a weighting north of 60%. Of course, industrials are sort of a catch-all segment to describe that which is less simple to classify.

My observations are these:

1. The PowerShares Cleantech Fund is unique, and likely to be quite profitable as an adjunct to a well-balanced portfolio.
2. PZD has qualities that make it part infrastructure, part "green" and part mid-cap growth. Mid-cap growth can be purchased with the iShares S&P Mid Cap 400 Growth Fund (IJK).

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