Van Eck Drafts Small-Cap Indonesia ETF

September 06, 2011

Van Eck to build out its Indonesia product line with a small-cap equities ETF.

Van Eck Global, the New York-based money management firm known for its natural resources investment strategies, filed paperwork with the Securities and Exchange Commission to market an equities ETF focused on small-cap Indonesian stocks that would add to an existing Van Eck Indonesia fund.

The Market Vectors Indonesia Small-Cap ETF will join the already-existing Indonesia Index ETF (NYSEArca: IDX) and the iShares Investible Market Index Fund (NYSEArca: EIDO).

The proposed Van Eck fund will also compete with ETFs Rye Brook, N.Y.-based IndexIQ has in the works—IQ Asian Tigers ETF; the IQ Asian Tigers Consumer ETF; and the IQ Asian Tigers Small Cap ETF—that will include Indonesia in their respective investment strategies. Index IQ defines “Asian Tigers” as Indonesia, Malaysia, the Philippines, South Korea, Taiwan, Thailand and Vietnam.

Investing in Indonesia and other Asian countries is in many ways an indirect play on China, as many up-and-coming countries in the region are pumping out products aimed at the Chinese market. That said, small-cap companies are more associated with demand in domestic markets, and Van Eck’s planned ETF no doubt is targeting consumer-related companies in the world’s most populous Muslim nation.

The new Van Eck fund will normally invest 80 percent of its assets in securities that are part of the ETF’s benchmark, the proprietary Market Vectors Indonesia Small-Cap Index, the filing said. Under the fund’s rules-based methodology, a given company is considered Indonesian if it is based there; listed on an exchange there; or generates at least 50 percent of its revenues in Indonesia, according to the paperwork.

Van Eck didn’t say in the filing what the annual expense ratio of its new ETF would be, nor what its ticker symbol might be.

Van Eck’s existing Indonesia ETF, “IDX,” and iShares’ “EIDO” have expense ratios of 0.60 percent and 0.61 percent, respectively.

 

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