Barclays Wins Race For All-Global Stock ETF

March 28, 2008


Also included in the launch is the iShares MSCI ACWI ex-US Index Fund (NASDAQ: ACWX). That will compete against several others, including the Vanguard FTSE All-World ex-US ETF (AMEX: VEU). With an expense ratio of 0.35%, it debuts about 10 basis points more expensive than VEU, however.

The differences, of course, will come down to index performance and construction. ACWX will rely on a combination of different benchmarks put together by the industry leader MSCI into a global ex-U.S. version.

Its breakdown between regions at the end of 2007 was skewed heavily to developed markets in Europe. The United Kingdom had 16.5%; France 8%; Germany 7%; Switzerland 5%; Spain 3.3% and Italy 2.9%. It also had Japan at 14.8%, some 6.3% in Canada and 19% in emerging markets.

The low-price leader among global ex-U.S. ETFs, VEU has nearly the exact same emerging markets exposure. The fund, which this month turned one year old, had about the same in Japan (14.3%) and slightly less in China (2.4% vs. ACWX's 3.1%).

"The new global products are sort of the caps to the pyramid," Archard said. "They fill out our product lineup very nicely."

The San Francisco-based fund giant now has 61 different international ETFs on the market.

On Friday, BGI also opened trading on:

  • The iShares MSCI Israel Capped Investable Market Index Fund (NYSE Arca: EIS).
  • The iShares MSCI Turkey Investable Market Index Fund (NYSE Arca: TUR).
  • The iShares MSCI Thailand Investable Market Index Fund (NYSE Arca: THD).

But the funds come with pricier expense ratios of 0.74% each. Since they track MSCI's investable markets indexes, all three will provide access to large- and small-cap stocks in those countries. Each has about 68 different names and the portfolios, despite their all-cap natures, will lean heavily toward the largest market-cap-sized companies.

"As countries continue to get more diversified, these were the next three that moved into our bubble as ETF candidates," Archard noted.

Also out is the iPath Optimized Currency Carry Exchange Traded Note (NYSE Arca: ICI). "We've got three single currency iPaths we launched last year," Archard said. "The advisor feedback we got was that they'd like to be able to invest in currency baskets as well. So this takes pretty standard institutional carry trade strategies and looks at the G-10 currencies."

With an expense ratio of 0.65% per year, ICI tracks the Barclays Intelligent Carry Index. That benchmark uses quantitative modeling to capture the returns of the highest-yielding currencies from G-10 nations. The methodology results in the portfolio taking long positions on some currencies and shorting in lower-yielding currencies.

But it doesn't have any set number of long and short currencies it'll take position in at any given time. As of February, the ETN was shorting the U.S. dollar, the Swiss franc, the Swedish krona and the Canadian dollar. It was long the six other currencies in its basket. Those were: the euro, the yen, the British pound sterling, the Australian dollar, the New Zealand dollar and the Norwegian krone.  

"There is some risk involved with a currency ETN," Archard said. "But ICI has a predefined methodology using a mean variance optimization strategy to keep volatility within about a 5% range."


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