A total of four ETFs came to market on Wednesday, including an innovative emerging market fund from WisdomTree that peels state-owned enterprises out of the portfolio.
The other three include a new Deutsche Bank currency-hedged strategy focused on the eurozone; a global asset allocation fund from Meb Faber’s Cambria Asset Management, and an active “best ideas” fund from ETF upstart Validea organized around stock picks from the likes of Warren Buffett.
Wednesday’s four launches lift to 193 the total number of ETF rollouts so far in 2014, compared with 162 launches in all of 2013, according to data compiled by ETF.com. Total U.S.-listed ETF assets now stand at $1.962 trillion in a total of 1,672 strategies, including 243 ETNs.
The robust pace of launches this year suggests the ETF industry continues to gather momentum—and assets—almost 22 years after the first ETF was brought to market. Indeed, investors are increasingly seeing the light regarding ETFs; namely, that they are cheap, transparent and, with each new launch, opening up more and more pockets of the investment universe.
XSOE Excludes State-Owned Enterprises
The WisdomTree Emerging Markets Ex-State-Owned Enterprises Fund (XSOE) is a first-of-its-kind fund that targets emerging market companies that have government ownership amounting to less than 20 percent of their respective market capitalizations.
Companies eligible for inclusion in the index must have total market capitalizations of at least $1 billion and meet certain liquidity screens.
They also must be incorporated or domiciled in one of 18 emerging markets, according to the prospectus: Brazil, Chile, China, Czech Republic, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Peru, the Philippines, Poland, Russia, South Africa, Taiwan, Thailand or Turkey. The index methodology requires that components be listed in one of those countries or in the U.S., although the prospectus notes that China-domiciled components may be listed in Hong Kong.
Although XSOE is the first emerging market ETF to specifically exclude companies with significant government ownership, the fact that it has nearly 400 components puts it on comparable footing with broader-based emerging market ETFs such as the iShares MSCI Emerging Markets ETF (EEM | B-96) and the Vanguard FTSE Emerging Markets ETF (VWO | C-84), which have 800 and 900 components apiece.
With a 58-basis-point expense ratio—amounting to $58 for each $10,000 invested—XSOE is more expensive than VWO, which has an expense ratio of 0.15 percent. However, it is much cheaper than EEM’s 67 basis points. The Schwab Emerging Markets Equity ETF (SCHE | B-82) remains the cheapest fund in the broad emerging market space, with an expense ratio of 14 basis points.