The ETF firm goes back to the well with plans for a small-cap version of its yen-hedged blockbuster DXJ.
WisdomTree, the publicly traded New York-based ETF firm, is looking to expand on the blockbuster success it’s had with the WisdomTree Japan Hedged Equity Fund (NYSEArca: DXJ) by putting into the regulatory pipeline a small-cap version of DXJ.
The firm is also looking to add other country-focused currency hedged strategies to its roster, including a fund focused on Korea and one on the U.K., according to two separate filings it put into registration this week.
The WisdomTree Japan Hedged SmallCap Equity Fund will track a proprietary dividend-weighted index that measures the performance of Japanese companies of small capitalization—at least $100 million in market cap—that are listed in Tokyo.
These companies must derive less than 80 percent of their revenue domestically in order to be included in the mix, the filing said. It’s that type of focus on exporters and companies with a global footprint that has helped its broader counterpart, DXJ, do so well.
Last November, WisdomTree tinkered with DXJ’s benchmark to tilt it toward exporters—companies that have done well as the yen has weakened due to stimulus measures that have sought to bring Japan out of its deflationary doldrums. Since then, the now-$6 billion fund—which serves up currency-hedged exposure to Japanese equities—has rallied some 50 percent in the past six months while seeing net inflows of $4.72 billion.
Small-cap companies are often thought to be more sensitive to domestic growth stories, which could put WisdomTree’s new ETF in a rather sweet spot at a time when all eyes are on Japan’s aggressive quantitative easing measures that are designed to spur growth in a country that has been plagued by slow growth and deflationary pressures for almost 25 years.
The new ETF will also screen for companies that have paid at least $5 million in cash dividends on common shares in the annual cycle, and that have seen consistent trading volume to the tune of $100,000 average daily dollar volume for three months preceding rebalance, and at least 250,000 shares a month for six months.
Securities are weighted based on annual cash dividends paid, the filing said, with individual stocks capped at 2 percent, and sectors capped at 25 percent.