AROUND THE WORLD OF ETFs

April 21, 2011

Vanguard Cuts Fees On 6 ETFs
Vanguard Group announced in late February that it had cut the price of the Vanguard MSCI Emerging Markets ETF (NYSE Arca: VWO) by 18 percent. It also slashed expense ratios on five other ETFs, saying the cuts reflect greater efficiencies in the way it runs the funds.

VWO now costs 0.22 percent—compared with 0.27 percent previously—making it the cheapest broad-market emerging markets ETF.

The other Vanguard ETFs that saw their expense ratios lowered include:

  • Vanguard MSCI Pacific ETF (NYSE Arca: VPL) to 0.14 percent from 0.16 percent
  • Vanguard MSCI European ETF (NYSE Arca: VGK) to 0.14 percent from 0.16 percent
  • Vanguard Total World Stock ETF (NYSE Arca: VT) to 0.25 percent from 0.30 percent
  • Vanguard FTSE All-World ex-U.S. ETF (NYSE Arca: VEU) to 0.22 percent from 0.25 percent
  • Vanguard FTSE All-World ex-U.S. Small Cap ETF (NYSE Arca: VSS) to 0.33 percent from 0.40 percent

First Trust Debuts Smart Phone ETF
First Trust rolled out in mid-February its so-called smart phone ETF that’s focused on technology companies specializing in devices like iPhones or BlackBerrys.

The First Trust Nasdaq CEA Smartphone Index Fund (Nasdaq GM: FONE) tracks the Nasdaq OMX CEA Smartphone Index, a benchmark focused on information technology and telecommunications. FONE comes with a 0.70 percent annual expense ratio.

The benchmark includes companies involved in everything from hardware manufacturing to operating systems, to software and service names associated with the development, sales and use of smart phones. The index is a modified equal-dollar-weighted index comprising some 80 securities, according to its recent filing with the Securities and Exchange Commission. About 45 percent of the portfolio is allocated to “handset” companies that manufacture the equipment; 45 percent to “software applications/hardware components” and the final 10 percent to wireless network “providers,” the filing said.

ProShares Launches ‘UltraShort’ TIPS ETF
ProShares recently rolled out the ProShares UltraShort TIPS ETF (NYSE Arca: TPS), describing it as the first geared ETF focused on the Treasury inflation-protected securities market. The new product provides investors double the inverse of the daily returns on an index of TIPs.

The launch comes at a time when investors are again worried that the U.S. Treasurys market will move downward amid renewed signs of U.S. economic recovery. The aftermath of the market crash of 2008-2009 has been characterized by fits and starts of recovery, and many investors generally consider TIPs to be better tools ahead of, instead of during, a spike in inflationary pressures.

The new short TIPs fund has an expense ratio of 0.95 percent, according to information on the company’s website. The ETF is tied to the Barclays Capital U.S. Treasury Inflation Protected Securities (TIPS) Index (Series-L).

DB Suspends DAG Creations
As of Feb. 15, Deutsche Bank suspended “further issuance” of the PowerShares DB Agriculture Double Long Exchange Traded Note (NYSE Arca: DAG), but noted that redemptions of the notes won’t be affected by its decision.

Deutsche Bank didn’t provide a reason for its decision in a press release, and an official at the bank in New York declined to comment beyond that statement. However, industry sources believe exposure the ETN held to corn, wheat, soybeans and sugar futures approached limits that might attract the attention of regulators at the Commodity Futures Trading Commission. Halting creations was a way for Deutsche Bank to avoid any regulatory problems.

The move may cause the leveraged ETN and its $148.8 million in assets as of Feb. 14 to trade like a closed-end fund, as it will now have a finite number of outstanding shares.

Global X Unveils ASEAN ETF
In mid-February, Global X launched the first-ever U.S.-listed ASEAN ETF, which provides exposure to the rapidly growing economies of Southeast Asia.

In 1967, Indonesia, Malaysia, the Philippines, Singapore and Thailand formed the Association of Southeast Asian Nations, or ASEAN, to foster economic and cultural cooperation among Southeast Asian countries. Today the organization also includes Brunei, Cambodia, Laos, Myanmar and Vietnam.

Just prior to launch, the Global X FTSE ASEAN 40 ETF (NYSE Arca: ASEA) was most heavily weighted toward Singapore (41.19 percent), followed by Malaysia (32.82 percent), Indonesia (14.77 percent), Thailand (10.58 percent) and the Philippines (0.61 percent).

Financials is ASEA’s largest sector, with 43.55 percent of assets under management; followed by telecommunications, with 15.62 percent; and industrials, at 14.97 percent.

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