Daily ETF Watch: New Beyond BRICs Fund

July 25, 2014

iShares has put into registration an emerging market ETF that will exclude the BRICs countries at a time when most of the BRICs are weighed down by political instability and/or a slowing economy.

Markets in Brazil, Russia and China are all underperforming global markets due to geopolitical tensions in Ukraine, civil unrest in Brazil and an economic slowdown in China. In contrast, India’s markets have surged in recent months thanks to elections that have yielded a pro-business reform-oriented prime minister.

The iShares MSCI Emerging Markets Horizon ETF is benchmarked against the MSCI Emerging Markets Horizon Index, which is designed to track the equity performance of the smallest 25 percent of countries by market capitalization in the universe of MSCI Emerging Markets Index countries, according to the filing.

Indonesia, Philippines, Qatar, Thailand and the United Arab Emirates—which are among the best-performing markets in 2014 so far—are included in the benchmark, alongside other similarly small-sized developing markets. For example, the iShares MSCI Thailand Capped Fund (THD | B-96) is up some 20 percent despite a bloodless military coup that took place a few months ago.

Associated fees and tickers are not yet available for the proposed fund.

Updated Filing

ProShares has updated paperwork detailing tickers and fees for four long and short pairs of U.S.-listed funds that target high-yield and investment-grade debt credit default swaps (CDSs), allowing investors to bet on the interest-rate outlook, whatever their direction.

The filing comes at a time when the Federal Reserve has signaled it will raise rates sooner rather than later in 2015 if labor data continues on its current downtrend trajectory. Investors who are leery of rate hikes have turned to short-duration fixed-income products to stem interest-rate risks.

Specifically, the “long” ProShares funds are designed to increase in value as the credit quality of underlying parties improves—a scenario that implies the overall rate outlook is trending lower; meaning that yields on junk debt and investment-grade debt are converging with those of Treasury debt, and that the rate environment isn’t threatening in any way to the credit quality of issuers.

Conversely, the “short” funds are designed to increase in value as the credit quality of the underlying parties deteriorates—a scenario that implies the overall rate outlook is trending higher; meaning that yields on junk debt and investment-grade debt are diverging from those on Treasury debt, and that the rate environment is becoming a threat to the credit quality of issuers.

The eight CDS funds, organized as long and short pairs that ProShares hopes to bring to market, include:

  • ProShares CDS North American HY Credit ETF (TYTE), 0.50 percent, or $50 for every $10,000 invested
  • ProShares CDS Short North American HY Credit ETF (WYDE), 0.50 percent
  • ProShares CDS North American IG Credit ETF (IGTY), 0.30 percent
  • ProShares CDS Short North American IG Credit ETF (IGWY), 0.30 percent
  • ProShares CDS European HY Credit ETF, 0.50 percent
  • ProShares CDS Short European HY Credit ETF, 0.50 percent
  • ProShares CDS European IG Credit ETF, 0.30 percent
  • ProShares CDS Short European IG Credit ETF, 0.30 percent

 

 

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