US-Listed ETFs Sorted by Asset Class and Year-to-Date Return

More documents

Recommendations

Info

Why I Own: EPOL iShares MSCI Poland Investable Market ETF Name: Kim Arthur Title: President Firm: Main Management Founded: 2002 Location: San Francisco, CA AUM: $450 million All ETFs? Yes ETFR: Do you have a favorite ETF for European exposure? Arthur: Right now, we’re very interested and have owned—for full disclosure here—Poland ETFs. There are two ways to play it: EPOL or PLND. You’re basically picking up EPOL for a trailing P/E of 13x. It has an adjusted return on equity of almost 8 percent and yields about 2.5 percent. And what I find interesting is, when we’re kind of swimming around and looking at ex-U.S., you pick up EPOL for about 1.5 multiple points cheaper. You’ve got about the same dividend yield. But you’re getting almost a point-plus higher return on equity. And, obviously, the growth rate is significantly higher. Poland is one of the few countries that have actually raised rates since we hit the bottom of the crisis. I think they’re ahead of the issue; they have positive real rates over there. They’re not sitting in an easy monetary policy situation. ETFR: Why adopt a single-country ETF approach, instead of using something more broad-based, like the Vanguard MSCI Europe ETF (NYSE Arca: VGK)? Arthur: We do like broad-based country exposure where we’re just looking for a country or sector or asset class exposure. But in this specific case, we’re trying to get very granular with the countries that we really feel good about. We want to make sure that we don’t have unintended consequences or unintended bets that you get from a shotgun approach, when you take a broad country basket or sector approach. That’s specific to the way this product is constructed. As a result, we’re kind of unconstrained by the benchmark. We can actually have zero exposure to countries that the benchmark has exposure to. But we’d better hope that we’re more right than wrong with regard to a country that we deleted, because otherwise it’s going to cause us some headaches. ETFR: Does the individual-country approach require more maintenance and oversight than the “set it and forget it” stance that many investors might take with a more regional approach? Arthur: It definitely does; I think there’s a lot more tactical maneuvering that you have to do, because those individual countries are kind of zigging and zagging. You either get opportunities or you’ve got flash points, where you need to pause and consider if your thesis still holds true. This is a lot more of a hands-on approach, and one that advisors can do themselves if they’re going to be dedicated, following all of the different metrics that you need to look at. If they look at that and say, “My real function is actually asset-gathering and servicing my clients,” then they’re probably better off either outsourcing to a manager like us, or taking the “set it and forget it” approach you mentioned, with periodic rebalancing when things get out of whack. ETFR: If investors had to pick one or the other, why choose PLND vs. EPOL? Why go with Market Vectors instead of iShares? Arthur: The easiest question there would iShares MSCI Poland Investable Market ETF (EPOL) Segment: Equity Poland–Total Market Issuer: BlackRock Legal Structure: Open-End Fund Expense Ratio: 0.61% AUM: $134.6 million ADV (60-Day): $44.5 million Avg. Spread: 0.27% Competing Funds: PLND Data as of: 4/11/2011 be, “Do you want pure MSCI exposure?” If you’re benchmarked against an MSCI index, then you’re better off buying EPOL. But if you want a little bit more of an active component, it would be PLND. PLND was first to market. When we started playing in Poland, it was the only play out there. Now, obviously, you have EPOL and you can choose between the two of them. EPOL actually has become very liquid—it’s picked up. I think a lot of it is because there are a lot of MSCI benchmark managers out there. They just sit down and say, “Give me the MSCI pure-play.” ETFR: What do you mean by “more active” with PLND? Arthur: You’re not going right up against the MSCI benchmark. Many of Van Eck’s country ETFs use custom benchmarks. So you’re going to have a little bit more of what Van Eck has put into it. We’ve used their Vietnam ETF [NYSE Arca: VNM] and their Egypt ETF [NYSE Arca: EGPT]. In Egypt’s case, a lot of the names that they have in that index are not indigenous companies sitting on the ground in Egypt, but doing business with Egypt. It allows the ETF to get exposure to those markets. I think that’s why Van Eck is first to market in a lot of these places. We typically will look through the sector exposure on two comparable ETFs like EPOL and PLND and ask, “Are we getting the sector exposure that we want? Is there too much materials sector in PLND vs. EPOL?” If that’s the case, then maybe, all other things considered, we’ll pick the one that gives us the right exposure. May 26, 2010–April 11, 2011 M J J A S O N D J F M 2010 2011 55.43% 6 ETFR • May 2011
German ETFs: Now Or Never? By Paul Baiocchi When it comes to hunting for bargains in Europe in the past few years, all eyes have been on PIIGS, for better or worse. Portugal, Ireland, Italy, Greece and Spain have overshadowed more developed European nations in many investors’ minds. But when the sovereign debt crisis boiled over last summer, investors left the PIIGS behind and headed to Germany. As the continent’s largest and most dynamic economy, Germany holds much of the eurozone’s future in its hands. During the summer meltdown, Germany’s status as the anchor of the eurozone meant any bailout plans had to be cleared by Berlin. The country proved incredibly resilient in the face of the global credit crisis, bouncing back from a 4.7 percent decline in GDP in 2009 to post a 3.6 percent rise in 2010. Unlike its European brethren, Germany managed to keep unemployment below 10 percent even during the recession of 2008-09. In fact, Germany’s 7.4 percent unemployment rate in 2010 was its lowest since reunification. Will Germany’s economy continue to power forward unabated? Or will the headwinds facing its economy, both internally and externally, overwhelm investor returns? While returns may not match those realized by investors since the market bottom, German-focused ETFs have significant positives in their favor right now. Currently, there are two ETFs that target Germany exclusively (see Figure 1): the well-established iShares MSCI Germany Index Fund (NYSE Arca: EWG), which launched in March 1996 and has nearly $3 billion in assets; and the brand-new Market Vectors Germany Small-Cap ETF (NYSE Arca: GERJ), which launched in early April, just days before this issue went to print. A Bumpy Road Ahead? Despite its resiliency in recent times, the German economy is not without its warts. The German population is relatively old, with an average age of 44.9 years. This is a product of the country’s low birth rate as well as its low population growth rate, Will Germany’s economy continue to power forward unabated? Or will the headwinds facing its economy, both internally and externally, overwhelm investor returns? both of which put Germany low in the global rankings, in the 17th percentile. More troubling, however, is the reliance of the eurozone on Germany. The sovereign debt issues of the eurozone have the potential to drag on the German economy, as any further bailouts will require significant German involvement. Not only do German banks have exposure to the sovereign issues of the PIIGS, but bailouts of its European counterparts would raise the specter of higher taxes, putting pressure on German consumers. Over 50 percent of German exports are to other European countries, making further economic turmoil in the region a significant risk to the continued prosperity of the German economy. A strong euro also makes German exports to the U.S. and China—which together currently receive over 14 percent of Germany’s exports—less competitive. As with virtually every country on the planet right now, Germany also has much to fear from inflation. German consumer prices have risen sharply in the first half of the year. The prices of all basic materials are on the rise, with the rise in the price of oil being exacerbated by uncertainty in the Middle East. Because Germany has a daily deficit of over 2.5 million barrels of oil and 81 billion cubic meters of natural gas, rising energy prices pose a significant economic threat to company margins; specifically, iron and steel producers. It should also be noted that Germany has very little to nothing in the way of domestic companies operating in the energy sector, meaning it is not only shelling out for things like natural gas and oil, it is not benefiting in any way from the rising prices. For investors, these issues are likely to impact newcomer GERJ more than the entrenched EWG; the small-cap fund has a far greater weight in the industrials and consumer discretionary sectors at nearly 50 percent of the fund, in addition to a negligible weighting in consumer staples (see Figure 2). Meanwhile, EWG’s collective weighting in those three sectors is less than 35 percent of its portfolio. The Good News Despite the potential pitfalls, Germany’s economy remains vital. The country boasts a highly skilled workforce and a literacy rate in excess of 99 percent. Seventy percent of the German economy comes from the service sector, bolstered by a reputation for tech-savviness and the world’s most advanced telecommunications network. And despite their reliance on European buyers, the specific buyers—France, the Netherlands, the U.K., Switzerland, Belgium and Austria—are in much better shape than the faltering economies that make the headlines. Furthermore, Germany’s export growth to China has accelerated in recent years, as the world’s fastest-growing economy is now the country’s second-largest customer. Tough Choices For Investors The German economy has provided investors with strong returns ever since the ETFR • May 2011 7
Page 1 and 2: Issue No. 126 May 2011 www.indexuni
Page 3 and 4: Index Publications LLC 353 Sacramen
Page 5: T H E P O W E R S H A R E S D B COM
Page 9 and 10: Eurozone Vs. Pan-European: Know The
Page 11 and 12: From Russia With Love from page 1 t
Page 13 and 14: What’s really in your ETF index?
Page 15 and 16: May 2011 U.S.-Listed ETFs Sorted by
Page 23: VWO Vanguard MSCI Emerging Markets

US-Listed ETFs Sorted by Asset Class and Year-to-Date Return

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?