Reinvented iShares Chip ETF Goes Live

October 15, 2010

iShares looks to attract more investors with revamped microchip ETF.

The iShares S&P North American Technology-Semiconductors ETF (NYSEArca: IGW) began trading today with a new benchmark, a new name and a new primary venue on the Nasdaq.

IGW is now called the iShares PHLX SOX Semiconductor Sector Index Fund (NasdaqGM: SOXX). The fund will track an index by the same name in a move iShares hopes will attract more investors to the microchip ETF.

The PHLX Semiconductor Sector Index (SOX) serves as the benchmark to some Direxion leveraged and inverse strategies already on the market, but iShares’ fund will be the first to provide investors with just 1X long exposure.

The semiconductor sector has led U.S. exports in the last five years, and many see its projected growth in the next few years as key to the U.S. economic recovery.

“There has been increased investor interest in a SOX-based ETF with the ongoing evolution of the index,” Noel Archard, head of U.S. iShares products, said recently in a press release.

Price-Weighted Index

SOX is a modified market cap-weighted index comprised of 30 semiconductor companies, and is among the most watched in the microchip segment. Part of that popularity means options on the SOX are some of the most actively traded contracts in the market today.

The fund’s previous benchmark, the S&P North American Technology Sector-Semiconductor Index, applies a modified capitalization-weighting methodology aimed at limiting the weight of individual stocks to 8.5 percent to prevent larger companies from dominating the index performance.

Since its July 2001 inception, the pre-existing iShares chip ETF had gathered assets of $186 million.

That’s more than its competitors, State Street Global Advisors’ SPDR S&P Semiconductor ETF (NYSEArca: XSD) and PowerShares’ Dynamic Semiconductors Portfolio (NYSEArca: PSI), which have gathered $76 million and $25 million in assets, respectively.

The fund has an expense ratio of 0.48 percent, costlier than the 0.35 percent SSgA charges for XSD, but cheaper than PowerShares’ PSI, which has a 0.60 percent expense ratio.

iShares, the world’s largest ETF firm, said investors who already own the ETF don’t need to take any action in connection with the changes.

 

Correction: Originally, this story mistakenly stated that ProShares offers products linked to the SOX index. It also provided information on the SOX index that was no longer current.  Please find the text above to reflect these corrections.

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