Daily ETF Watch: EM Internet Fund Launch

Big Tree Capital, a firm headed by the chief executive officer of the China-focused indexing firm AlphaShares, today is launching with its partners an ETF focused on Internet and e-commerce use in both the emerging and frontier markets.

The Emerging Markets Internet & Ecommerce ETF (EMQQ), which is being brought to market using Exchange Traded Concepts’ exemptive relief, comes with an annual expense ratio of 86 basis points, or $86 for each $10,000 invested, according to the fund’s latest updated prospectus.

The fund’s index is based not on where constituent companies are based, but rather on how much of their revenue is derived from Internet-related activities in a particular country. The index was designed by Kevin Carter’s Big Tree Capital. Carter is known for the China-focused benchmarks designed by his firm AlphaShares that underlie a few ETFs sponsored by Guggenheim.

EMQQ’s broad-based approach of including countries around the emerging markets, but filtering their presence in the index through the lens of a particular theme—in this case, Internet-related commercial activity—is consistent with a new investment theme in the emerging markets. So too is the blending of emerging market and frontier market countries.

Specifically, the new fund’s approach echoes the strategy shift in the past two years of Emerging Global Advisors, a New York-based ETF firm that is focused exclusively on emerging market strategies. The firm’s most successful fund, the EGShares Emerging Markets Consumer ETF (ECON | C-36), canvasses a plethora of emerging market countries. It has $1.27 billion in assets.

EMQQ’s Index

As noted, companies eligible for inclusion in the fund’s index will derive a majority of their assets or revenues from Internet and e-commerce activities in emerging market nations, the prospectus said. The areas targeted include Internet services, Internet retail, Internet broadcasting, Internet media, online advertising, online travel, search engines and social networks.

The fund will target the following 26 countries in the emerging and frontier market investment universe: Argentina, Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Malaysia, Mexico, Morocco, Nigeria, Peru, Philippines, Poland, Qatar, Russia, Thailand, Turkey, Taiwan, United Arab Emirates, Vietnam and South Africa.

EMQQ’s primary listing is on NYSE Arca.