Daily ETF Watch: EG Shares Fund Facelift

November 25, 2014

Emerging Global Advisors, the ETF market’s only firm that focuses solely on the emerging markets, filed regulatory paperwork detailing plans to shutter two funds with few assets and also to rejigger a third with a new name and a new in-house index.

The moves amount to an attempt to sharpen its dividend-targeting fund lineup at a time when investors continue to buy alternatives to income-generating investments. Indeed, bond yields remain very low, and bond prices could fall sharply once official borrowing rates start to steadily climb higher in the coming months and years as the economy recovers from the financial crisis.

The New York-based firm said Monday that by Dec. 25, the following two ETFs will no longer exist:

At the same time, Emerging Global said the EGShares Low Volatility Emerging Markets Dividend ETF (HILO | F-27), a fund with about $37 million assets, next year will get a new index designed by the firm’s own indexing unit.

A New Year, A New HILO

On Jan. 26 of next year, HILO, one of the first “smart beta” ETFs to mine the investment universe for dividend-rich stocks in the emerging markets, will have a new name: the EGShares EM Quality Dividend ETF.

The new fund will be organized around the EGAI Emerging Markets Quality Dividend Index, replacing the FTSE Emerging All Cap ex Taiwan Low Volatility Dividend Index.

HILO’s new index addresses dividend quality by screening for such factors as return on equity, positive earnings growth, maximum dividend yield and three-year dividend payment consistency. It will hold about 50 companies, according to the regulatory filing.

Emerging Global’s indexing unit defines the following countries as “developing”: Bahrain, Bangladesh, Botswana, Brazil, Bulgaria, Chile, China, Colombia, Croatia, Cyprus, Czech Republic, Ecuador, Estonia, Ghana, Hong Kong, Hungary, India, Indonesia, Ivory Coast, Jordan, Kazakhstan, Kenya, Kuwait, Latvia, Lithuania, Macedonia, Malawi, Malaysia, Malta, Mauritius, Mexico, Morocco, Namibia, Nigeria, Oman, Pakistan, Peru, Philippines, Poland, Qatar, Romania, Russia, Serbia, Slovak Republic, Slovenia, South Africa, South Korea, Sri Lanka, Taiwan, Tanzania, Thailand, Tunisia, Turkey, Uganda, Ukraine, United Arab Emirates, Vietnam, Zambia and Zimbabwe.

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