Can WisdomTree succeed in combining two of the ETF market’s hottest trends in one fund?
WisdomTree Investments, the exchange-traded fund firm known for its “fundamental” indexes that screen stocks for earnings and dividends, filed regulatory paperwork to market a low-volatility ETF focused on Brazilian companies, combining two popular ETF-market trends into one fund.
The WisdomTree Brazil Low Volatility Equity Fund will be based on a WisdomTree index that comprises the 50 Brazilian companies with the best combined rank of three factors: historical volatility, return on equity, and return on assets, the prospectus said. The starting universe is the equity securities of all companies listed on BM&FBOVESPA, Brazil’s primary stock exchange, the filing said.
The plan to market such a fund has an undeniably trendy aspect to it. After all, why not launch a fund that attempts to capture the rising fortunes of Latin America’s biggest economy, and through the lens of low volatility? These two pockets of the ETF market have yielded some of the most successful funds in the 20-year history of the ETF industry.
On the one hand, the $7 billion and highly liquid iShares MSCI Brazil Index Fund (NYSEArca: EWZ) casts a long shadow over the world of emerging markets investments, and on the other hand, the $4 billion PowerShares S&P Low Volatility Portfolio (NYSEArca: SPLV) has demonstrated how open some investors are to navigating sometimes-roiled post-2008 markets with a specialized equities vehicle.
The index underlying the proposed WisdomTree low-volatility Brazil fund is weighted annually by a volatility factor that gives more weight to companies with lower historical volatility. Companies that qualify for inclusion in the index must have a minimum market capitalization of $1 billion and minimum average daily trading value of $2 million or more at the time of purchase.
WisdomTree said the index will have holdings in the following sectors: consumer discretionary, consumer staples, energy, financials, health care, industrials, information technology, materials, telecommunication services and utilities.
WisdomTree didn’t say in the filing what the fund’s ticker or annual expense ratio might be, but did say the ETF would have its primary listing on the Nasdaq stock exchange.