Emerging Global Sets Splits On Four ETFs

September 09, 2010

The red-hot emerging markets lead Emerging Global to declare share splits.

Emerging Global Shares, the
Ridgewood, N.J.-based fund sponsor that focuses exclusively on emerging market ETFs, announced stock splits on four of its most widely traded products, a reflection of just how hot this pocket of the investment universe has become.

Three funds—the EGShares Emerging Markets Composite ETF (NYSEArca: EEG), the Emerging Markets Energy ETF (NYSEArca: EEO) and the Emerging Markets Financials ETF (NYSEArca: EFN)—will undergo two-for-one splits, while the Emerging Markets Metals/Mining ETF (NYSEArca: EMT) will split three-for-one.

Emerging Global’s share splits will be payable after the close of trading on Sept. 15, to shareholders of record on Sept. 13. The ETFs will begin trading on their new split-adjusted bases on Sept. 16.

Emerging market ETFs have been popular among investors over the past 18 months, as China, India, Brazil and other emerging economies continued to grow even as the developed world slogs through the worst downturn in more than a generation. With inflows of nearly $2 billion, the Vanguard MSCI Emerging Markets ETF (NYSEArca: VWO) was atop IndexUniverse.com’s creations list in August.

Riding The Wave

Emerging Global Shares has benefited from this trend. For example, the Emerging Metals/Mining ETF began trading in July 2009 at just shy of $47 per share, and closed yesterday at $55.91, a gain of about 19 percent.

Given the growing interest in emerging markets, Emerging Global decided to split the funds to make them more accessible to individual investors.

“With the performance of emerging market equities in the last 18 months, an analysis of our funds led us to the conclusion that four of our ETFs were being offered at prices which may put them out of the reach of some investors,” said Robert Holderith, president and CEO of Emerging Global Shares.

In addition, Holderith says that keeping his company’s ETFs priced at around $20 per share reduces the pressure on market makers, who create new ETF shares by purchasing so-called creation units, or blocks of 50,000 shares.

“Market makers other than our lead market maker have to put up capital to buy a [creation] unit of shares, so if that cost is half or third, then we think there’s a greater likelihood that they’ll be creating shares,” Holderith said in a telephone interview.

New Consumer-Focused ETF To Launch Next Week

While Emerging Global Shares does not have plans at the moment to split any of its other ETFs, it does have a new emerging markets consumer-focused ETF launch slated for Sept. 14, and intends to register several new products with the Securities and Exchange Commission within the next 60 days.

Although Holderith did not provide details of Emerging Global Shares’ impending registrations, he said his firm would maintain its focus on emerging-economy ETFs.

“We think if you’re an equity investor and you’re looking for growth, it’s difficult to look for growth anywhere but emerging markets,” he said.

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