IndexIQ Debuts Small-Cap Taiwan ETF

May 19, 2010

IndexIQ, a Rye Brook, N.Y.-based ETF firm known for its hedge fund replication strategies, launched a small-cap exchange-traded fund today focused on
Taiwan, its fourth launch in a lineup that will include 13 small-cap strategies targeting commodities and Asian economies.

The IQ Taiwan Small Cap ETF (NYSEArca: TWON) follows three initial rollouts in late March and April, the commodities-focused IQ Australia Small Cap ETF (NYSEArca: KROO) and IQ Canada Small Cap ETF (NYSEArca: CNDA), as well as the IQ South Korea Small Cap ETF (NYSEArca: SKOR). Similar to SKOR, TWON will have a heavy focus on the computer technology and industrial sectors.

Asian economies, led by China and
, are among the hot spots in the global landscape right now. One other fund is focused on that market, the $3 billion iShares MSCI Taiwan Index Fund (NYSEArca: EWT). But EWT is heavily focused on giant and large-capitalization companies, while TWON will tap into the names comprising the country’s bottom 15 percent by market capitalization.

is one of the four Asian Tigers,” IndexIQ Chief Executive Officer Adam Patti told IndexUniverse. “
seeks to be a leader in several industries in which the nation competes. Currently, investors have no way to access small-cap companies in

Patti said that in January,
’s exports surged 75 percent from year-earlier levels, a rate not seen in more than 33 years. Corporate earnings in the island country off
should rise as much as 80 percent in 2010, Patti noted. What’s more,
has a booming renewable energy industry that should garner about $20 billion in new investments in the next five years.

TWON will allocate 30 percent to technology, but it will also have about 27 percent tied to industrials, 18 percent to materials and nearly 10 percent to consumer discretionary.

According to Patti, companies included in the basket will first have to clear through IndexIQ’s liquidity screens, but overall, small-cap companies are positioned to experience
’s growth story firsthand, and TWON’s small-cap strategy “provides a better flavor of the actual economy” than larger-cap funds, Patti said.

Small-Cap Family

IndexIQ outlined all 13 of the small-cap ETFs it plans to offer in a filing with the Securities and Exchange Commission in March.

“The one thing that ties them all together is China,” Patti said in a previous interview, noting that many of the countries the funds are focused on are among
’s top 10 trading partners.

The next launch will be a pair from
Asia, the IQ Hong Kong Small Cap ETF (NYSEArca: HKK) and the IQ Singapore Small Cap ETF (NYSEArca: SAX). The remaining three Asia-focused funds include the IQ Indonesia Small/Mid Cap ETF (NYSEArca: INNN), the IQ Malaysia Small/Mid Cap ETF (NYSEArca: MALA) and the IQ Thailand Small/Mid Cap ETF (NYSEArca: THAI), according to the SEC filing

IndexIQ also plans to introduce four funds focused on commodity companies, including the IQ Global Agribusiness Small Cap Equity ETF (NYSEArca: CROP), the IQ Natural Gas Small Cap Equity ETF (NYSEArca: IGAS), the IQ Global Crude Oil Small Cap Equity ETF (NYSEArca: IOIL) and the IQ Global Gold Small Cap Equity ETF (NYSEArca: GLZ).

Each fund will track an underlying index of the same name and will strive for a fully replicating strategy. However, the funds might at times hold a representative sample of equities in the indexes as they seek to replicate returns. The indexes were created by IndexIQ's parent company Financial Development Holdco LLC.

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