AROUND THE WORLD OF ETFs

October 19, 2010

Van Eck, WisdomTree Launch Emerging Market Debt ETFs
Van Eck and WisdomTree both launched emerging market debt ETFs recently; importantly, both funds hold only bonds denominated in local currencies. Previously, the only emerging market debt ETFs available held dollar-denominated debt.

The Market Vectors Emerging Markets Local Currency Bond ETF (NYSE Arca: EMLC) tracks the J.P. Morgan Government Bond Index-Emerging Markets Global Core Index. As of July 1, the benchmark had 171 constituents with maturities ranging from one to 30 years. At the fund’s launch, the index covered 13 countries, each capped at a 10 percent weight. EMLC charges an expense ratio of 0.49 percent.

WisdomTree followed up in August with the WisdomTree Emerging Markets Local Debt Fund (NYSE Arca: ELD). Unlike EMLC, though, ELD is actively managed. Its allocation model divides 13 emerging markets into three tiers based on size and risk parameters. ELD charges an expense ratio of 0.55 percent.

Global X Debuts First Lithium ETF
Global X recently rolled out the first ETF to tap into the renewable energy theme through lithium companies.

Launched in July, the Global X Lithium ETF (NYSE Arca: LIT) invests both in lithium miners and lithium battery makers. By investing in battery manufacturers, the fund captures the “high-tech component” of the lithium story. The metal, which is widely used in batteries for cell phones and laptop computers, is also key for the electric car industry, which uses lithium-ion batteries in its vehicles. And because lithium is not traded on any commodities exchanges, investors previously have had no way to gain targeted exposure to the metal.

At launch, LIT’s basket was split nearly 50-50 between miners and producers in seven different countries. The fund, which tracks the Solactive Global Lithium Index, comes with an annual expense ratio of 0.75 percent.

iShares Unveils Nine Ex-US Sectors
Mid-July saw the launch of nine new iShares ETFs targeting sector subindexes of the MSCI All Country World ex USA Index.

The new funds are the first family of sector ETFs to cover developed and emerging markets, but exclude the United States. They include the following:

  • iShares MSCI ACWI ex US Consumer Discretionary Sector Index Fund (NYSE Arca: AXDI)
  • iShares MSCI ACWI ex US Consumer Staples Sector Index Fund (NYSE Arca: AXSL)
  • iShares MSCI ACWI ex US Energy Sector Index Fund (NYSE Arca: AXEN)
  • iShares MSCI ACWI ex US Health Care Sector Index Fund (NYSE Arca: AXHE)
  • iShares MSCI ACWI ex US Industrials Sector Index Fund (NYSE Arca: AXID)
  • iShares MSCI ACWI ex US Information Technology Sector Index Fund (NYSE Arca: AXIT)
  • iShares MSCI ACWI ex US Materials Sector Index Fund (NYSE Arca: AXMT)
  • iShares MSCI ACWI ex US Telecommunication Services Sector Index Fund (NYSE Arca: AXTE)
  • iShares MSCI ACWI ex US Utilities Sector Index Fund (NYSE Arca: AXUT)

The iShares MSCI ACWI ex US Financials Sector Index Fund (NYSE Arca: AXFN) launched separately back in January. Each fund charges an expense ratio of 0.48 percent. Holdings range from roughly 60 for the health care ETF, AXHE, to well over 260 for AXFN.

Schwab Enters Fixed-Income ETFs
Charles Schwab, which just entered the ETF market in November 2009, made its first foray into fixed income with the launch of three U.S. Treasury ETFs in early August.

The new funds include the Schwab U.S. TIPS ETF (NYSE Arca: SCHP), the Schwab Short-Term U.S. Treasury ETF (NYSE Arca: SCHO) and the Schwab Intermediate-Term U.S. Treasury ETF (NYSE Arca: SCHR). The TIPS fund has an annual expense ratio of 0.14 percent, while the other two funds both have expense ratios of 0.12 percent, according to the company’s Web site. As with other Schwab funds, Schwab clients aren’t charged trading commissions when they buy and sell the funds.

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