Daily ETF Watch: New EM Real Estate Fund

New fund is first to focus exclusively on real estate securities in emerging markets.

On Monday morning, Guggenheim Investments rolled out a first-to-market emerging markets real estate ETF. With income, alternative exposures and emerging markets on investor minds, the fund seems like it may be a triple threat.

The Guggenheim Emerging Markets Real Estate ETF (EMRE) tracks an index from AlphaShares, the China-focused investment management company that boasts Burton Malkiel as its chief investment officer. The benchmark covers companies and real estate investment trusts that primarily develop, manage or own properties in markets that S&P Dow Jones Indices has classified as having emerging status, a press release said.

A fact sheet from Guggenheim indicates that at launch, the fund had 118 holdings from 18 different markets. China has the largest presence in the index, with a 19.05 percent weighting. The fact sheet also highlights the growth of emerging markets’ presence in real estate securities from roughly 2 percent of the market in 2000 to 11 percent in mid-2014.

EMRE comes with a total expense ratio of 0.65 percent.

The Vanguard Global ex-U.S. Real Estate ETF (VNQI | B-78) is the biggest fund in the international real estate space, with more than $2.1 billion in assets under management, and it probably has the largest weighting to emerging markets of all its competitors, at 13.68 percent.

While that’s fairly proportional exposure to the real-world emerging market real estate securities space, EMRE provides investors with pure, targeted exposure, albeit at a higher price. VNQI’s expense ratio is just 0.27 percent, almost 40 basis points lower.

4 PIMCO Fund Closures

Friday was the last trading day for four of PIMCO’s fixed-income exchange-traded funds. Although the funds had all been trading for a few years, they had failed to accumulate assets.

The ETFs and their assets at the time their closures were announced in mid-August are as follows:

• Pimco Germany Bond ETF (BUND | F-59), $3.2 million
• Pimco Canada Bond ETF (CAD | D), $17.8 million
• Pimco Australia Bond ETF (AUD | D-68), $22.9 million
• Pimco Build America Bonds Strategy (BABZ | C-62), $24.1 million

BABZ was rolled out in September 2010, while the other ETFs launched in November 2011. The funds will be liquidated on or around Oct. 1. A little more than 60 ETF and ETN closures have been announced year-to-date.

Fidelity Bond ETFs Ready To Go
Three transparent, actively managed bond ETFs from Fidelity Investments are ready to launch on the NYSE, judging by the paperwork filed with the SEC by the fund provider. Each ETF covers a core fixed-income area.

The Fidelity Total Bond ETF (FBND) will cast a broad net, selecting bonds from both the high-yield and investment-grade spaces, as well as from emerging markets. The fund is benchmarked against the Barclays U.S. Universal Bond Index, which it will use as a guide when allocating among different bond asset classes, maturities and sectors, according to the prospectus.

The filing also notes that the fund will seek to match its benchmark index’s interest-rate risk and can invest up to 20 percent of its assets under management in lower-grade bonds. In addition to investing in securities from both foreign and domestic issuers, the fund can also use derivatives and forward-settling contracts to achieve leveraged exposure.

The Fidelity Corporate Bond ETF (FCOR) will focus on investment-grade corporate debt and be benchmarked against the Barclays U.S. Credit Bond Index, seeking to reflect its level of interest-rate risk. Although FCOR’s target market is investment-grade debt, it can invest in lower-quality securities.

Finally, the Fidelity Limited Term Bond ETF (FLTB) will seek to invest in the high- and medium-quality tiers of the investment-grade debt space, targeting a dollar-weighted average maturity of two to five years. Its benchmark index is the Fidelity Limited Term Composite Index.

All three funds come with an annual expense ratio of 0.45 percent. A launch date has not yet been made public.

The funds will be Fidelity’s first bond ETFs. The firm’s last big launch was 10 index-based U.S. sector funds rolled out in October of last year; they’ve since accumulated roughly $1.4 billion in assets under management.

Global X Readies Sector Rotation Fund
Global X has a sector rotation ETF in registration that appears to be on the verge of launching, after its prospectus was updated with both a ticker and expense ratio. The Global X | JPMorgan US Sector Rotator Index ETF (SCTO) is an ETF of ETFs that will invest in the nine Select Sector SPDR ETFs, the SPDR Dow Jones REIT ETF (RWR | A-84) and the iShares 1-3 Year Treasury Bond ETF (SHY | A-97).

According to its prospectus, it will rebalance monthly, selecting the five-best-performing sectors from the previous month, as long as their performance is positive. Should there be less than five sectors with positive performance in the previous month, or if any of the top-performing funds exhibit too much volatility, the fund will allocate assets to SHY accordingly.

The fund was put into registration earlier this month.

SCTO comes with an expense ratio of 0.86 percent. No launch date has been announced.