More iShares Country ETFs On The Horizon
By Cinthia Murphy | February 02, 2010 8:23 am
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iShares is continuing its blitz of filings for country-specific exchange-traded funds. Recent filings from the company add five more such products to the firm's growing list of similar funds in registration, and the iShares lineup already includes an impressive list of ETFs tied to indexes covering individual international markets. The latest group of proposed funds covers a few well-trodden areas as well as some spaces that have not yet been covered by listed funds but that already have potential funds in registration. The list from iShares includes the following:
Like other iShares ETFs, the new funds will track their respective MSCI indexes through a representative sampling strategy. The Details The U.S. fund is a diversified ETF that will essentially be a mid- and large-cap portfolio that tracks an index investing in securities from companies in the top 85 percent of the domestic space by market capitalization. There are numerous others in that space, but iShares' move could signal that investors are increasingly ready to give U.S. stocks another try after a massive exodus last year left the asset class stripped of assets. At last rebalancing, the index comprised 601 components, with energy, industrials and materials carrying the most sector allocations. iShares’ take on Brazil’s small-cap market is perhaps an attempt to replicate the success Van Eck has had in that segment with its version of a Brazil small cap fund. The Market Vectors Brazil Small-Cap ETF (NYSEArca: BRF) has garnered some $700 million of assets in only eight months of existence. BRF, which has a basket of 55 securities, is a concentrated play on Brazil’s domestic themes such as consumer goods, financials and infrastructure. But the small-cap focus has translated into volatile price action, as is often the case with less liquid names. iShares isn’t new to Brazil. The company already offers the massive MSCI Brazil Index Fund (NYSEArca: EWZ), which is a nondiversified play on Brazil’s largest securities and ADRs. With an AUM of nearly $11 billion, EWZ is an interesting fund because while it focuses on materials, energy and financials, it also has significant exposure to commodities through its investments in commodity-related names. iShares also plays Brazil through its BRIC fund. In fact, it plays Russia that way too. Its new planned offering, the iShares MSCI Russia ETF, will track an index that is a variation of the MSCI Russia Index, the MSCI Russia 25/50 Index. While the new fund will invest in the top 85 percent of Russia-listed companies by market capitalization, it will also take into account investment diversification requirements that apply to regulated investment companies (RICs), under U.S. law. The legislation—which was originally created on the heels of the mutual fund birth to protect investors from conflicts of interest within companies and exchanges in an effort to boost confidence in the overall system—essentially holds companies to higher transparency and disclosure requirements. The basket, at last rebalancing, included 28 names, with most weighting attributed to energy, materials and financials. The debuting ETFs focused on Ireland, Egypt and the Philippines could be the first country-specific funds available to U.S. investors for each of those economies. Or maybe not: PowerShares and State Street Global Advisors each have an Ireland fund in registration, while Van Eck and Global X both have filed forms for Egypt ETFs. Global X is also planning a Philippines fund. Each one of the iShares will hold a broad basket encompassing 99 percent of local names in its respective country, and those markets each have their own interesting quirks: The Egyptian market is often very volatile but has consistently shown strong performance in recent years, while Ireland and the Philippines are economies heavily dependent on trading partners, which exposes them to a lot of foreign economic risk. The Ireland fund’s benchmark comprised 21 names as of October, and focused primarily on consumer staples, financials and materials. The Egypt ETF will track an index that included 41 companies, with most sector allocations dedicated to financials, industrials and telecommunications services. The Philippines ETF will replicate an index comprising 28 components, mostly in utilities, telecommunications and financials. BlackRock Fund Advisors is the adviser for the funds.
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