AROUND THE WORLD OF ETFS

March 02, 2007

 

StateShares

State-specific investing: That's the idea behind the new ETF filing from XShares. The group submitted papers to the SEC to launch new ETFs covering equity investments in 22 individual states. It's not clear if XShares plan to extend its franchise to cover the other 28 states. The funds will trade on the NYSE. There is no word yet on tickers or expense ratios.

No Stamp Tax

In a move that could alter the landscape of the European ETF marketplace, the British government said it would scrap the so-called "stamp tax" on foreign ETFs. Previously, ETFs incorporated outside the U.K. that wanted to be listed and/or traded on the London Stock Exchange (LSE) had a 50 basis point annual excise tax slapped on shares. This (understandably) discouraged cross-listings, as it more than doubled the average expense ratio for the funds. As a result, the LSE has fallen behind in the market for ETF listings.

The new stamp tax exemption will only cover ETFs with underlying shares that are not listed in the U.K. ETFs based on U.K.-listed shares will continue to be covered by the stamp act tariff.

BGI In Bonds

BGI launched two new bond ETFs on the London Stock Exchange: The iShares GBP Index Linked Gilt ETF (ISIN: IE00B1FZSD53) tracks the performance of the Barclays UK Government Inflation-Linked Bond Index, a mixed-duration index with an average duration term of 12.3 years; the iShares FTSE UK All Stocks Gilt ETF (ISIN: IE00B1FZSB30) tracks the FTSE UK All Stocks Gilt Index, a more well-known index of U.K. government bonds stretching across all maturities. It charges 0.20 percent in annual fees, and at press time was yielding close to 4.52 percent.

ETF Securities Expands To Euronext

ETF Securities continued its commodities march across Europe, cross-listing 25 ETFs on Euronext. The funds, which already trade in London and Germany, include 15 individual commodity ETFs, nine commodity "sector" funds and one fund linked to the Dow Jones AIG Commodity Index (DJ-AIG). As of yet, ETF Securities has no plans to expand into the U.S.

iShares The Love

BGI is lowering fees on many of its international ETFs, according to a new prospectus filed at the SEC. BGI spokeswoman Christine Hudacko said that as asset counts rose on the funds, Barclays was able to pass down economy-of-scale savings to shareholders. The truth is that it has to pass down those savings. Barclays' management agreement for many of its ETFs calls for a direct relationship between fees and assets levels. Still, a fee reduction is a fee reduction, and Barclays should be congratulated for doing the right thing.

Curiously, the fee on the hugely popular iShares MSCI Emerging Markets Fund (NYSE: EEM) remains stuck at 75 basis points. That fund is not bound by any asset-linked fee reduction, so despite a huge surge in assets, its ER will stay the same.

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