Daily ETF Watch: Israel Tech Fund Debuts

November 03, 2015

Today saw the launch of a technology-focused Israel ETF. The BlueStar TA-BIGITech Israel Technology ETF (ITEQ) tracks an index provided by BlueStar Indexes that includes 65 high-tech companies drawn from Israeli companies listed on the Tel Aviv Stock Exchange, Nasdaq, NYSE, London Stock Exchange and Singapore Exchange.

There are only two other Israel-focused ETFs currently trading, and they target the broader market rather than a specific sector affiliation. Steven Schoenfeld, founder and chief investment officer of BlueStar Indexes, described ITEQ’s benchmark as encompassing Israeli companies’ “established, emerging and disruptive technological innovation.”

The index spans a broad range of technology categories, including cybersecurity, renewable energy, biotechnology, defense and sustainable agriculture, as well as more traditional information technology companies. The index can include small-, mid- and large-cap securities, but individual companies are capped at 10 percent of the index during rebalancing. Further, should any company exceed 24 percent of the index in between rebalancings, it will automatically be knocked down to a 20 percent weighting.

As of launch, the fund’s three top components are Amdocs Ltd. at 12.01 percent, Check Point Software at 11.34 percent and Mobileye NV at 10.29 percent.

ITEQ was launched using Factor Advisors’ exemptive relief, comes with an expense ratio of 0.75 percent and launched on the Nasdaq exchange.

VWO Begins Transition

The $38 billion Vanguard FTSE Emerging Markets ETF (VWO | C-88) kicked off November by beginning the switch to its new benchmark, the FTSE Emerging Markets All Cap China A Inclusion Index, which expands the fund’s coverage to include China’s A-shares market and small-cap stocks. As of Nov. 2, the fund has switched to a transition index, according to a press release.

The change was first announced in the spring along with other index changes that were to broaden the benchmarks for the Vanguard Developed Markets ETF (VEA | A-93), the Vanguard FTSE Europe ETF (VGK | A-97) and the Vanguard FTSE Pacific ETF (VPL | A-94) to include small-caps. In addition, VEA was to add coverage of Canada.

VWO’s transition index is designed to be dynamic, and will allow the fund to gradually adjust its exposure. During the next 12 months or so, the fund will add coverage of small-cap and China A-shares securities and decrease its allocations to its existing holdings.

Vanguard has described the transition as a two-phase process, with VWO tracking its new benchmark index in the second phase. The gradual transition is designed to keep costs low, the firm said, adding that in the interests of transparency it would publish the changes to the transition index on a monthly basis on the company’s website.

VWO is the first of the major broad emerging market ETFs to add A-shares exposure, not to mention small-caps, according to Vanguard. At around the same time Vanguard announced its ETFs’ index changes, MSCI, which had been considering the addition of A-shares to its main index families, said that it had decided against doing so. If it had gone ahead with the change, the iShares Emerging Market ETF (EEM | B-100) would also have been adding A-shares to its holdings.

The move adds yet more distinguishing characteristics to VWO, which already stood apart from EEM in its exclusion of South Korea, one of the largest emerging markets. Vanguard and FTSE classify South Korea as a developed market.


Contact Heather Bell at [email protected].

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