Guggenheim To Offer ASEAN-Leaders ETF

September 19, 2013

The firm behind the BulletShares ETFs is diving into Southeast Asia.

Guggenheim Investments is looking beyond China and diving into Southeast Asia, with plans to market a new ASEAN-focused fund, joining a growing list of issuers of emerging market ETFs reaching beyond the traditional BRIC markets of Brazil, Russia, India and China.

Specifically, the firm filed regulatory paperwork this week to market the Guggenheim ASEAN Leaders ETF, which will invest in the Association of Southeast Asian Nations, including the Philippines, Indonesia, Malaysia and Singapore. It didn’t specify an index, nor did it say how much the fund might cost or under what ticker symbol it might be listed.

The beyond-BRICs and beyond-China trends among investors have been taking shape in recent months since emerging markets have sold off due to the slowdown in China, middle-class unrest in places like Turkey and Brazil, and, not least, on the prospect of an end to the Fed’s bond-buying program.

The weighting of individual countries in the index will be limited to 35 percent, while sector weights within each country are capped at 40 percent and issuer weights are capped at 5 percent. The fund will invest in common stock, American depositary receipts and global depositary receipts that comprise the index.

Also, the fund may borrow money from a bank up to a limit of 10 percent of the value of its assets, but only for temporary or emergency purposes, according to the filing.

Guggenheim now joins State Street Global Advisors, which filed for a SPDR MSCI Beyond BRIC ETF (EMBB) last month, and Emerging Global Advisors, which launched the EGShares Beyond BRICs ETF (BBRC | F-46) in August 2012, betting on equities from countries that are often overlooked by many emerging market strategies already in the space.

Those countries include Chile, Colombia, Czech Republic, Egypt, Hungary, Indonesia, Malaysia, Mexico, Morocco, Peru, the Philippines, Poland, South Africa, Thailand and Turkey.

In a recent blog, IndexUniverse ETF analyst Dennis Hudachek wrote that while investors shouldn’t wholeheartedly ditch funds like the $39 billion iShares MSCI Emerging Markets ETF (EEM | B-96) or the $50 billion Vanguard FTSE Emerging Markets ETF (VWO | B-86), holding only VWO and EEM may no longer be enough.

“Even broad, cap-weighted funds with a ‘beyond BRICs’ theme are recently gaining traction. This theme provides greater exposure to many smaller emerging markets that get little to no love in EEM and VWO,” Hudachek wrote.

Last month, Guggenheim said in a filing that its $218 million Guggenheim BRIC ETF (EEB | B-43) will switch its index from the BNY Mellon BRIC Select ADR Index to the BNY Mellon BRIC Select DR Index in October, and with the new benchmark, gain newfound access to Russia.


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