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

More documents

Recommendations

Info

March 6, 2009 lows. iShares’ EWG has returned 87 percent since that bottom, comparing favorably to broader international stocks as represented by the widely followed iShares MSCI EAFE Index Fund (NYSE Arca: EFA), which returned “just” 72 percent in that time period. EWG has been the only choice for Germanophiles for a long time, and as such, has amassed $3 billion in assets. It’s broadly diversified, and captures all the important sectors of the German economy. “EWG is pretty diverse,” said Matthew McCall, president of Penn Financial Group LLC and noted sector-focused advisor. “You have financials, consumer discretionary, industrials and materials all between 15-20 percent, although you do have a heavy focus on services within those top four sectors.” Although the fund is a fair representation of the German economy, it’s heavily concentrated: 62 percent of the fund’s assets are invested in the top 10 holdings, and the average market cap is $50 billion. The top 10 holdings are large multinational companies that derive the majority of their revenues in foreign countries. This is in line with the economic fundamentals of the German economy, which has the third-largest current account surplus in the world. The launch of Van Eck’s new small-cap fund (GERJ) gives investors a new way to play. The same firm also has a Germany midcap ETF in registration. Whether these funds catch on is largely dependent on whether they provide a true alternative. “Will the new funds focus on companies that are Germany specific?” asked McCall prior to GERJ’s launch. “Will they focus on the German consumer and the German economy, or will they be more like EWG, which owns large multinational firms like Siemens, BASF, Allianz and Baer?” GERJ’s small-cap focus could serve it very well on these vectors, attracting investors who might be daunted by the top-heavy nature of Germany’s large-cap market. With roughly 90 components, GERJ’s top 10 holdings are just a third of the total portfolio, and the fund clearly has a much more diversified distribution across its holdings than EWG. Moreover, with 70 percent of German workers employed by small-cap companies (according to Van Eck), GERJ should be providing access to the “real” Germany, with less of the international noise seen by EWG—though it should be noted that there are multinationals in GERJ’s portfolio. However, the fund is less diversified in terms of sectors, with nearly 35 percent of its portfolio invested in industrials. The rest of the fund’s top five sector weights range from a 15.8 percent weighting in information technology to a 9.7 percent weighting in health care, with consumer discretionary and financials falling between those two. Aside from materials, with a 9.5 percent weight, the remaining four sectors represented in the fund all have weights of 2.2 percent or less. Financials, consumer discretionary, industrials, materials, health care and Figure 1 Two ETFs Target Germany’s Markets Figure 2 FUND Sources: ETF issuers; data as of April 6, 2011. Sector Weights: GERJ vs. EWG GERJ Sources: ETF issuers; data as of April 7, 2011. iSHARES MSCI GERMANY utilities are all top sectors in EWG, with weights ranging from 9.1 percent for utilities to roughly 18.5 percent for financials. The remaining three sectors with any significant representation in the fund have weights ranging from 3.7 to 6.6 percent. With these allocations, there’s little doubt that GERJ will rise and fall more on the fate of Germany alone than the health of the eurozone. For investors, that makes the decision about where to invest a simpler one than it used to be. If your investment thesis is that Germany will anchor recovery throughout the eurozone, and that German multinationals will drive global growth, then EWG is the logical choice to express that opinion. If you believe the resilience of the German economy will make it an island in a faltering Europe, then GERJ is more likely to deliver. MARKET VECTORS GERMANY SMALL-CAP Ticker EWG GERJ Exp Ratio 0.53% 0.55% Assets (M) $2,918.7 $2.5 Largest Holding Siemens AG, 11.2% MTU Aero Engines, 4.2% Inception 3/12/1996 4/4/2011 EWG Industrials 34.5% Financials 18.5% Information Technology 15.8% Consumer Discretionary 16.6% Consumer Discretionary 14.9% Industrials 16.2% Financials 12.5% Materials 15.2% Health Care 9.7% Health Care 10.1% Materials 9.5% Utilities 9.1% Telecommunications 2.2% Information Technology 6.6% Consumer Staples 0.5% Telecommunications 3.9% Energy 0.2% Consumer Staples 3.7% Utilties 0.2% Other/Undefined 0.2% 8 ETFR • May 2011
Eurozone Vs. Pan-European: Know The Difference By Carolyn Hill So you think you know Europe? Many U.S. investors claim they have a handle on the Old World, but the Europe of the past is rapidly evolving. The truth is, as the European Union has grown, a divergent line has formed. There are really two Europes now: the eurozone, with countries that have embraced the euro as their currency; and geographic Europe, a pan-European view that includes non-EU countries— namely, Denmark, Norway, Sweden, Switzerland and the United Kingdom. Investors chasing exposure in Europe through ETFs have to choose between these two visions of the continent: ETFs with holdings in what is widely considered the “pan-European” region, and ETFs that only cover the “eurozone.” The former includes the SPDR STOXX 50 (NYSE Arca: Figure 1 FEU), the PowerShares BLDRS Europe 100 ADR (NasdaqGM: ADRU), the iShares S&P Europe 350 (NYSE Arca: IEV) and the Vanguard MSCI Europe ETF (NYSE Arca: VGK). The latter includes the SPDR Euro STOXX 50 (NYSE Arca: FEZ) and the iShares MSCI EMU (NYSE Arca: EZU). (See Figure 1.) It may seem like a shallow choice, but as with many ETF choices, the differences to your portfolio can be dramatic. One Continent, Two Choices The biggest missing pieces in eurozone ETFs are the large U.K. or Swiss stocks that traditionally make up large percentages of pan-European funds. On average, the U.K. comprises 38.1 percent of pan-European ETFs, while Switzerland accounts for 13.4 percent. That means the U.K. and Switzerland drive 50 percent of pan-European ETF performance, making those products much different investments than the eurozone ETFs. (See Figure 2.) The drastically different holdings between both sets of European funds make sense, as half of the companies that pan- European ETFs invest in are off limits to the eurozone ETFs. But the exclusion of U.K. and Swiss stocks also makes a significant impact on each fund’s sector allocations, and this (combined with currency variance) is likely the more dramatic source of return differential. The U.K.’s tilts have a stronger impact on pan-European tilts than Switzerland’s, but both matter. The U.K.’s higher concentration in energy pulls up that sector’s weight in the pan-European ETFs, while its lower industrials weighting pulls the same sector Eurozone And Pan-European ETFs Compared RETURNS FUND TICKER AUM (M) 1-MO 3-MO 1-YR SPREAD EXP. RATIO LARGEST COUNTRY LARGEST HOLDING EUROZONE SPDR Euro STOXX 50 FEZ $170 -1.34% 9.50% 6.77% 0.13% 0.29% France 37.05% Total 5.59% iShares MSCI EMU EZU $873 -0.78% 8.98% 9.15% 0.06% 0.56% France 30.78% Total 3.47% PAN-EUROPEAN SPDR STOXX 50 FEU $38 -1.62% 5.80% 6.52% 0.52% 0.29% PowerShares BLDRS Europe 100 ADR iShares S&P Europe 350 Vanguard MSCI Europe ADRU $21 -1.90% 5.94% 8.92% 0.20% 0.30% IEV $1,343 -1.67% 5.87% 11.08% 0.04% 0.60% VGK $3,152 -1.88% 5.40% 11.60% 0.03% 0.14% U.K. 37.92% U.K. 47.34% U.K. 34.08% U.K. 33.10% Nestlé 5.75% HSBC 5.76% Nestlé 3.02% Shell 2.90% Sources: iShares, PowerShares, SSgA, Vanguard, Bloomberg and NYSE Arcavision. 60-day average spread data as of 3/29/2011; all other data as of 3/25/2011. ETFR • May 2011 9
Page 1 and 2: Issue No. 126 May 2011 www.indexuni
Page 3 and 4: Index Publications LLC 353 Sacramen
Page 5 and 6: T H E P O W E R S H A R E S D B COM
Page 7: German ETFs: Now Or Never? By Paul
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

Create successful ePaper yourself

Delete template?

Save as template?