Daily ETF Watch: Recon, Global X Launches

October 23, 2014

Three funds from two different providers are rolling out today, including one that is a retread of some Germany-focused ETFs that Northern Trust closed in 2009. The other two are fund-of-funds ETFs following two distinct sector rotation strategies designed by JP Morgan.

Recon Capital Revives DAX Ticker

Recon Capital Partners, via the exemptive relief of ETF Series Trust, is launching a fund on the Nasdaq exchange that will track Germany’s most widely used local index.

The Recon Capital DAX Germany ETF (DAX) is tied to the DAX index, which covers the 30 largest and most liquid stocks trading on the Frankfurt stock exchange. According to a fact sheet on the DAX Indices website, the DAX component companies are equal to roughly 80 percent of the market cap of the Frankfurt exchange’s Prime Standard segment.

Essentially, investors holding the fund DAX will be using the index most used by local German investors looking to get indexed exposure to their home market. The fund comes with an expense ratio of 0.45 percent, or $45 for each $10,000 invested. German is the eurozone’s biggest economy, and it remains among the most prospective for investors, given the country’s high place in the macro value chain.

Recon Capital appears to be looking to tread ground that others tried to lay claim to previously. Back in 2008, Northern Trust’s family of NETS ETFs made its debut. It mostly consisted of ETFs tracking the local indexes of various foreign markets, including France’s CAC-40, Hong Kong’s Hang Seng and the U.K.’s FTSE 100, among others.

Among those funds was the NETS DAX Index Fund, which traded under the same ticker as Recon Capital’s fund. However, the NETS had closed down entirely by the end of February 2009 due to a lack of assets, despite a great deal of fanfare around their launch and competitive expense ratios. Many had expected the funds to square off with iShares’ lineup of single-country ETFs.

The iShares MSCI Germany ETF (EWG | A-97) certainly has even more of a foothold in the market, with $4.7 billion in assets under management. However, its expense ratio currently stands at 0.51 percent, more expensive than the new DAX ETF.

A lot of water has passed under the bridge in the ETF industry in the more than five years since the launch of the NETS family, so it’s hard to tell if there might be room for a set of viable competitors to the iShares single-country ETFs. Recon Capital appears to thinks so.

It also has a FTSE-100 ETF in registration by ETF Series Trust that is slated to trade under the ticker “UK.”

Global X Launches JP Morgan Funds
Global X today will roll out two quasi-active ETFs of ETFs it co-developed with J.P. Morgan using Morgan indexes, according to an article in the Wall Street Journal.

Sector Rotator ETF

The underlying index of the Global X | JPMorgan US Sector Rotator Index ETF (SCTO) will select a portfolio of other ETFs from a universe that includes 11 funds—the popular nine Select Sector SPDRs, a real estate fund and a short-term Treasury fund, according to the prospectus:

 

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